Originally posted on Capital Gains and Games.
Yesterday's The New York Times had a good story by Binyamin Appelbaum about how low interest rates are significantly driving down the government's borrowing costs.
Appelbaum said that, given the continuing very strong demand for U.S. debt, the Treasury is considering issuing securities with negative interest rates -- requiring buyers to pay for the privilege of safely parking their money -- and is assuming it will get lots of takers. In fact, the story shows that some investors in Treasuries are already getting a negative return and, given the alternatives, are happy to have it.
Appelbaum's piece is factually correct and interesting but misses the real story. As Jesse Eisinger of ProPublica wrote about a months or so ago in The Times and I posted about here, there are three important budget implications of this situation.
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