Wednesday, May 2, 2012

Video: Santelli On Floating Rate Notes

CNBC's Santelli with his view on why the United States Department of the Treasury is considering issuing a so-called  "floating rate note".

Comments please.


Salsabob said...

OMG, if the FED decides to increase rates, they may have to pay more interest! Wow, this is really insightful, Ricky.

I guess Ricky sees this as a harbinger of increased rates - just another hyperinflation-is-just-around-the-corner that we've been hearing for the last thousand corners or so.

I guess what makes it newsworthy (or, at least a “Santelli Exchange”) is Ricky believes taxpayers will pay for the additional interest grandma will be receiving. if and when they rates go up, and that is evil. Evil, I tell you!

I guess it wouldn’t help to point out that interest payments are just a subcategory of federal spending which is not dependent on taxes or borrowing. Yes, increasing federal spending might add enough demand to make inflation a concern. However, you could point out to Ricky that he can't get his scary ballon until there is a delightful boom first.

Also, you might note that Ron Ray-gun had a young (if you can imagine) Volker raise interest rates to quell inflation. You know, like old conservative Milt Freidman use to suggest?

Nay, can’t go there; Ricky’s head would explode.

Good luck with "raging little stick."

Max said...

This is a fairly good theoretical analysis:

As for the real, non-theoretical motive: it gives Wall Street another security to trade. More trading = more revenue. Simple as that.

Tom Hickey said...

"Taxpayer on the hook" again. Wrong, wrong, and wrong again.

Rick apparently doesn't get that indexing for inflation of any type, interest rates, cola's, etc. is inflationary since it injects NFA (anything the increases the deficit increases NFA) at at time when the problem is that ‚ as the sectoral balance approach shows — the deficit needs to be reduced in light of changing non-govt saving desire to quell rising inflation. Excessive demand is being generated relative to the capacity of the economy to expand to accomodate it. At such a juncture, increasing the deficit instead of reducing it is inflationary. Indexing bonds to inflation does just that.

Jonf said...

I don't get why the treasury would want to do this in the first place? If they want to get higher interest rates, that can be accomplished.