Everyone's Talking About This Sneaky Solution To The Debt Ceiling That Might Be Even Better Than The Platinum Coin
In a nutshell, the idea is that the Treasury would issue 10-year or 30-year notes that yield higher rates than those in the market. Investors would have to pay up for the ability to hold these premium securities.
Schumacher and Rjavinski say they discovered the idea in a Time Magazine piece by Christopher Matthews, who in turn cites Bloomberg View columnist Matt Levine.
Levine provides a simple, clear explanation of how super-premium Treasury issuance could help the Treasury Department to get around the debt ceiling:
Note: The revenue and spending numbers used in the above example are from the month between February 15 and March 15, 2013, and are not representative of the rest of the year due to seasonal factors. However, the point of the demonstration still stands.
"The overwhelming positive is that Treasury could issue bonds through somewhat normal channels, although with decidedly abnormal coupons and prices," say Schumacher and Rjavinski. " Another plus is that default would be off the table."
