“Perpetuals would be nice, but 100-year bonds get you almost to the same place. And amortizing would remove the lump sum principal problem for the investor, and it also reduces Treasury’s refinancing risk.”
Valerie Grant, senior fund manager in the group that runs AllianceBernstein LP’s responsible U.S. equities portfolios, says fiscal policymakers should set aside concerns about deficits and debt and focus on combating both the overall economic toll of the pandemic as well as long-term trends of inequality within the labor market.
“Even before the pandemic, many people were employed in jobs that couldn’t actually sustain a reasonable standard of living. Then you have this crisis, and the consequences are just awful and amplified because of that backdrop. So the fiscal stimulus is needed, and Treasury is having no trouble selling the debt.”
Takeshi Tashiro is a nonresident senior fellow at the Peterson Institute for International Economics.
“The U.S. faces a risk of Japanification. Or you may want to call it secular stagnation. This pandemic demands more aggressive actions by the governments and the central banks. Monetary policy has been doing everything it can. Fiscal policy is the only available policy instrument lately.
“Look at Japan. Debt is not a catastrophe as long as interest rates are low. I’m not saying the U.S. should have a higher level of debt, but huge deficits are not bad as long as you spend where you need to spend. Central banks are doing what they should do as the Fed maintains low rates when the government needs them to.”
Paul McCulley, the former chief economist at Pacific Investment Management Co., who now teaches at Georgetown University, says the U.S. Treasury and Federal Reserve are right to align their efforts and monetize some of the new debt.
“Right now we are in a situation where we unambiguously need fiscal policy dominance, and there’s nothing immoral about that. It’s very practical and is the anti-deflation, pro-democracy outcome we need.”
This article was provided by Bloomberg News.