In another stunning disply of cluelessness Treasury is going to issue floating rate notes in January.
For those unfamiliar with flaoting rate notes they are securities whose interest rate periodically adjusts to some benchmark, like Libor or a T-Bill rate. Usually they have a maturity of anywhere from two to five years. The securities the Treasury will sell are going to be 2-year notes with the interest rate pegged to a T-Bill rate.
Functionally a floating rate note is exactly the same things as the Treasury rolling over a 2-year Treasury note or something similar.
So the question is, why would the government sell floating rate notes when there has never been a problem with rolling over maturing debt, ever, and where the rate is set by the government (Fed) and the payment of any interest is simply a matter of crediting bank accounts?
To give you an example, so far this fiscal year (one month), Treasury has "rolled over" $5 TRILLION. That is not a typo. It's correct: Five T-R-I-L-L-I-O-N. Here is the data. (See Table III-A Redemptions.)
If you can roll over $5 TRILLION every month and you've been doing that, forever, what do you need floating rate notes for?
And by the way...$5 TRILLION per month is about what it comes down to because for the entire FY 2013 Treasury rolled over $62 TRILLION.
$62 TRILLION. Rolled over. In one year. And no spiking interest rates, debt collapse, hyperinflation and the world didn't come to an end. Furthermore, these figures are from the Treasury itself. These idiots apparently don't even look at their own numbers, because if they did they'd know that they don't have to conjure up some brand new security to be able to "entice" investors to buy government debt. There's no enticing. The whole floating rate note scheme is just a big, giant, admission that the guys driving the bus are totally lost.
I never hear Warren Mosler curse, but he called the people at Treasury "morons." That's, like, as bad as you're ever going to hear coming from Warren, believe me.
But the slur is deserved. Morons indeed.
