The world desperately wants to loan us money (Ezra Klein)

[swag]

http://www.washingtonpost.com/blogs/ezra-klein/wp/2012/07/12/the-world-desperately-wants-to-loan-us-money/

The Financial Times reports that there was record demand for 10-year Treasurys this week. “The $21 [billion] sale of 10-year paper sold at a yield of 1.459 per cent, the lowest ever in an auction.” William O’Donnell, a strategist at RBS Securities, told the FT that “we were expecting good auction results but this one has left me speechless.”

Remember: Low yields means we’re getting the money for a cheap. It means the market thinks we’re a safe bet. And it means we have the opportunity to get capital for almost nothing and invest it productively.

. . .

They’re negative. Negative! The market will literally pay us a small premium to take their money and keep it safe for them for five, seven or 10 years. We could use that money to rebuild our roads and water filtration systems. We could use that money to cut taxes for any business that adds to its payrolls. We could use that to hire back the 600,000 state and local workers we’ve laid off in the last few years.

Or, as Larry Summers has written, we could simply accelerate payments we know we’ll need to make anyway. We could move up maintenance projects, replace our military equipment or buy space we’re currently leasing. All of that would leave the government in a better fiscal position going forward, not to mention help the economy.

The fact that we’re not doing any of this isn’t just a lost opportunity. It’s financial mismanagement on an epic scale.

[freshwest]

1. Instead, Cantor is betting on us failing, not using the opportunity. Thanks, worth sharing.

[fasttense]

2. I guess that monstrous US federal debt is really a pussy cat.

I thought the sky was falling and we had to starve American children so we could pay off our monstrous debt. At least that is what the House is acting like. The Senate is no better, they are cutting food stamps to give multi-millionaires subsidies. All because our debt is just enormous.

And yet we can sell treasuries at 1.459, I can't even get that rate on my mortgage, a debt with real collateral.

I think this debt monster is a tame little kitten.

[AdHocSolver]

3. Or...T-notes are bought at low yields because buyers expect a big collapse.

They invest in T-notes to protect their principal assets.

So, the people who brought us the bubbles are now betting on a big collapse, and this is supposed to be an opportunity?

[magical thyme]

4. don't low yields go hand-in-hand with high prices?

If they expected us to collapse, they wouldn't buy our treasuries. I think they expect the Euro to collapse. They are parking their money here to protect it.