The Apocalypse Has Begun

Falling DownAt Wonk Blog, Neil Irwin writes, What’s Happening in the Treasury Bill Market Today Should Terrify You. “Terrify” is not a common word in the Wonk Blog lexicon. And if you are like most people, “treasury bill” is not common to your lexicon. If you know them at all, it is because you’ve seen them listed at the bank. And if you’ve looked at them anytime over the last couple of years, you’ve noticed that they pay very poorly. That’s not the terrifying aspect of them. I’ll get to that shortly.

Treasury bills are short term government debt. They mature at no more than one year, currently either 30, 60, or 90 days. You may know the drill. Suppose the going rate is 1%. In that case, you would buy a $100 bill for $99—at least if it were for a year. But no one has received 1% for a very long time. According to Irwin, on 30 September (just 8 days ago), treasury bills that matured on 17 October had a yield of 0.03%. Are you read to be terrified?

Yesterday (Monday), it was five times higher: 0.16%. Today (Tuesday), it was ten times higher: 0.30%. We’ll see what Wednesday brings.

I thought that the president spoke eloquently today about how not paying any of our bills would hurt our credit rating. (I wrote about this yesterday.) What’s going on with treasury bills shows that you don’t even have to default on your debts for it to hurt you. If you go around in public threatening to default, most lenders will be less inclined trust you. And that’s what’s happening. Irwin writes:

There are reports, including this one from Reuters, indicating that some of the biggest money managers in the world are starting to avoid US government debt that matures in the near future out of fear they will not be repaid promptly. Bond investors seem to be confident that the US government will make good on its obligations in the longer term—securities that mature a year or more from now are actually seeing their rates fall. But they are becoming less confident that these short-term securities will pay on time.

Of course, those longer term bonds too will start to increase if this continues on, especially if we actually do breach the Debt Ceiling. It’s funny, the conservatives who are pushing this are certain that they are the most patriotic of people. What they remind me of is William Foster in Falling Down. The worst traitors always think they are the greatest patriots.

Afterword

When I was younger, people used to say, “America: love it or leave it.” I don’t accept that at all. America isn’t perfect. We need to continue to make it a more perfect union. But I know that these conservatives are of the “love it or leave it” mentality. But they show time and again that their love is entirely dependent upon America being something that they approve of. I cannot quite contain my hatred for these people. Stop fucking up our country!

Update (8 October 2013 7:56 pm)

Dean Baker just wrote, The Post Doesn’t Scare Me. But I think he is being far too sanguine. The issue is not that the rates are very high. The issue is that they are going through the roof because people around the world don’t trust our government. Alone, they don’t mean anything. As an indication of how the world is reacting to this Debt Ceiling crisis, it is terrifying. Irwin used the right word.

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About Frank Moraes

Frank Moraes is a freelance writer and editor online and in print. He is educated as a scientist with a PhD in Atmospheric Physics. He has worked in climate science, remote sensing, throughout the computer industry, and as a college physics instructor. Find out more at About Frank Moraes.

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