Caroline Baum is a Bloomberg.com columnist who writes about bonds, banks, budgets and bubbles, of which she seems to know nothing. Maybe that's because Ms. Baum has a degree in poliitical science and cinema studies (which I guess qualifies her in the eyes of Bloomberg to write about bonds), but I'm not here to cast aspersions.
In her most recent piece, "Four Numbers Add Up to an American Debt Disaster," Ms. Baum has produced a real doozy. In that column she basically states that the United States is facing a "crisis" and a "disaster" becauase a lot of its debt is short term debt and $5.9 trillion of it is going to have to be rolled over five years from now.
Here's an excerpt:
|"In plain English, the Treasury’s reliance on short-term financing serves a dual purpose, neither of which is beneficial in the long run. First, it helps conceal the depth of the nation’s structural imbalances: the difference between what it spends and what it collects in taxes. Second, it puts the U.S. in the precarious position of having to roll over 71 percent of its privately held marketable debt in the next five years -- probably at higher interest rates."|
"In plain English??"
"Issuing short term debt helps to conceal the depth of the nation's structural imbalances??"
What the hell does that mean?
"Puts the U.S. in the precarious position of having to roll over 71% of its privately held marketable debt?"
Even if Ms. Baum were not well versed in MMT, or if she didn't understand the fact that there is never a problem rolling over debt denominated in a nation's own currency, she still could have gone to the Treasury's website and had a look at the amount of debt that the Treasury rolled over, successfully, last year. Had she done that Ms. Baum would have found that the Treasury rolled over $64 trillion of debt last year (see chart below) without so much as a hiccup. And, by the way, interest rates went down all along the yield curve, the Fed funds rate remained at zero, the dollar went up, stocks rallied, the economy grew, etc, etc, etc. In short, no disaster, no crisis, even though the amount rolled over was more than 10 times the amount that Ms. Baum tells us will produce a disaster.
And that's just the tip of the iceberg because in the past 10 years the Treasury rolled over $473 TRILLION of public debt (almost 80 times Baum's disaster-triggering-quantity), once again without any problem whatsoever. Rates even came down.
Just by looking at the data any reasonable person would have had to question their premise that a $5.9 trillion rollover five years from now would be something that triggered a crisis and a disaster. However, Caroline Baum did not bother to check. Ms. Baum prefers to engage in fear mongering.
I cannot tell if this is ignorance or subversion, but I'll give Ms. Baum the benefit of the doubt and call it ignorance. Whatever it is, it's fear mongering and It's completely irresponsible. It's also terribly shoddy journalism because the facts are easily available to anyone who would take five minutes to go get them.
From the Daily Treasury Statement of Sept 30, 2011