Treasury to issue floating rate notes--Morons!!

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.

My debate with Santelli now on Youtube

Some of you didn't get to see it, so here it is.

I am going to debate Rick Santelli on CNBC tomorrow!!!

Just got this from his producer. They invited me to debate Santelli on the subject of floating rate notes. Working out the details now. Looks like 11:30am EDT.

Will keep everyone posted.

-Mike Norman

Some more Santelli comedy

It’s amazing how CNBC allows Rick Santelli to rant on and on each and every day achieving levels of cluelessness that have never been seen before. If I were running the network I’d be really embarrassed.

Earlier today Santelli was ranting about a Treasury proposal that is being considered whereby the U.S. would start issuing floating rate notes.

For those not familiar with floating rate notes, the interest rate paid “floats.” That means if interest rates go up, the interest paid on the notes increases.

Santelli was sounding the fire alarm as usual, saying, “If interest rates rise, then the government will have to pay more interest. It will be horrible, terrible, the end of the world, etc. blah, blah, blah.”

The one thing Santelli seems to forget (as he often does) is that the government (the Fed) sets rates. So, why would the rates necessarily rise? The Fed could easily decide to keep rates low like its doing now and the whole question of interest rate risk is moot. Anyway, the whole question of interest rate risk for a sovereign, currency issuing nation like the U.S. is moot anyway because it has a monopoly on rate setting.

But let’s say rates do rise because the Fed raised them. Why would that be so terrible? Since the government is a net payer of interest, a rate increase (which, again, could only happen via the Fed) would be equivalent to a rise in transfer payments (government payments to people) to the private sector. What’s so bad about that? It’s giving people money, and just another form of deficit spending. By the way…the largest component of the Reagan deficits was interest on the debt and…you guessed it…we had an ECONOMIC BOOM largely because of that.

Santelli is totally clueless. He’s ranting about things he doesn’t understand. On the other hand, my 11 year old son can understand this stuff.

By the way, if you think Santelli is clueless, what about Geithner? Presumably, he’s the guy proposing floating rate notes? Can somebody please tell Timmy that the government sets the rate it pays, so floating or non-floating, it’s all the same thing.

I often allow these comments to drive me crazy as you can see. Then I calm down and realize that it's all about television ratings, and it has nothing to do with real information of any kind. Many people don't realize that. They don't realize that it's ALL about ratings. They think it's real information. If it were about real information then people like Rick Santelli wouldn't have a career on television.

Then it hits me...if it's all about ratings, why are we allowing a stupid, ratings-driven business to affect our policy, our country and our lives?

Then I get crazy again.