Pay attention, please, to Larry Kudlow’s projections in view of a Trump presidency:
If President-elect Donald Trump’s economic growth plan — slashing business and personal marginal tax rates and rolling back costly business regulations — is achieved next year, the economy could break out with growth between 4% and 5%. That means much higher interest rates.
This rate rise will be growth-induced, a good thing. Higher real capital returns will drive up real interest rates. And inflation will likely remain minimal, around 2%, with more money chasing even more goods alongside a reliably stable dollar-exchange rate.
We’re already seeing some of this with the big post-election Trump stock rally occurring alongside a largely real-interest-rate increase in bonds.
It’s upbeat, and relatively understandable. But as for national debt, he likes long-term (less costly) bonds as a way to save money.
The average duration of marketable Treasury bonds held by the public has been [a low] five years for quite some time. Almost incredibly, Treasury Department debt managers have not substantially lengthened the duration of bonds to take advantage of generationally low interest rates. Hard to figure
Because if you lengthen maturities, you “save a bundle.” But Treasury managers have been “sleeping at the switch,” not locking in our historically low rates for much longer time. (Like the homeowner who renegotiates.)
The key point? Start issuing much longer bond maturities. Muchlonger. If possible, America should experiment with 50-year debt issuance, and maybe go out as long as 100 years.
And this better happen fast.
Other countries do this, including Mexico, which “has done three 100-year issues since 2010. The sizes were small, and the bonds were sold in foreign currencies. But it can be done.”
Using “some rough back-of-the-envelope calculations,” Kudlow sees “a $1 trillion savings on budget-interest expense over the ten-year horizon.”
I offer all this — and there’s more which you can read — as much to give myself a leg up on the issue as to tell you. You’re welcome