Post
by jhogue » Fri Dec 14, 2018 10:06 am
I don’t claim to be up on the latest debates over Modern Monetary Theory, but there are some gaping holes in the blogpost you referenced:
Mike Norman’s claim that Treasury bonds are “welfare for the rich” strikes me as misleading—perhaps deliberately so. Sure, Warren Buffet’s company has billions in T-bonds, but the total market cap value of Berkshire Hathaway is far greater. Simply put, Warren would rather own shares in his company rather than an equivalent pile of T-bonds because their expected return is greater.
More to the point for us here—who do not necessarily think of ourselves as “rich”-- practically anybody can buy Treasury debt at market rates on the secondary market. Millions of ordinary citizens do. The minimum purchase for I bonds is only $25. Fidelity brokerage will sell you a Treasury of any duration from 3 months to 30 years for as little as $1,000.
Oh, and by the way: If you don’t like the interest T bills are currently paying, you can always buy corporate debt instead. AAA-rated corporate bonds will pay you more interest, but that reflects a market-adjusted return of capital risk premium. Treasury has never defaulted on its debt, which is why its bonds always pays less interest.
See TreasuryDirect website for more info on the history of savings bonds
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"