Issuing 3 month bills to reduce interest burden on US debt?
Hi Cullen, in one of your old articles you mention this which I don’t quite follow:
“The interest burden in the USA is actually declining as a % of GDP. We pay about $250B in debt service every year. The Federal govt could actually reduce this substantially by reducing the maturity on their debt. They have complete control over their interest costs if they so desire by controlling the duration of their bond issuance. Theoretically, they could just issue 3 month bills at low interest rates in order to keep their own interest costs low….”
How would issuing 3 month bills at low interest rates lower interest payment costs on debt? Does this not imply there must be a demand for 3 month bills in the first place to pull this off?
Also would this not devalue the currency if the market is flooded with 3 month bills to pay off the debt?
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