Borrowing Through the U.S. Treasury's "Fast Money Tree"
The Need to Balance Austerity and Growth in the 21st Century
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It is axiomatic that the bond market thrives on bad news, and that has turned out to be true during 2011 and 2012 as note and bond yields have continued to fall while prices have risen. In the case of the debt ceiling shutdown battle in July, 2011, the bond market continued to rally despite the threat of a failure by Congress to raise the debt ceiling. Eurozone woes and threats of default by a number of Euro countries (e.g., the “PIIGS,” Portugal, Italy, Ireland, Greece, and Spain), the real possibility of global contagion kept U.S. bonds at new lows given the flight to quality stampede of many institutional investors (e.g., several short term bills were auctioned at "0"). In the summer of 2011, the equities market remained choppy as the debt ceiling fiasco failed to inspire buying of equities, but did stimulate a "rush" to gold. However, gold sold off in 2012, but the Eurozone's failure to resolve its debt crisis as the Greek tragedy continued with new leadership vowing to leave the Eurozone. Even today in June of 2012, the 10-year Treasury note yields are less than 2.0%, and the threat of a Greek exit from the Eurozone portends a draconian financial meltdown around the globe. While Europe struggles with recession, the U.S. economy is rebounding, and is still considered a safe haven for global investors. Hence, while the U.S. debt has reached 100% of GDP, the "flight to quality" continues with Treasury's "Fast Money Tree" borrowing vast sums each week from global investors quickly, efficiently, and flawlessly at very low interest rates. This borrowing process which is executed through the "Fast Money Tree" allows the U.S. Government to continue the operation of its many essential functions at the lowest possible cost to the U.S. taxpayers. Unfortunately, 2012 promises to be a repeat of the 2011 debt ceiling battle only worse given a Presidential election in November, a dysfunctional Congress and Administration incapable of agreeing on a plan to stimulate the economy, and the potential catastrophic effects of a Greek exit from the Eurozone. Mix these political and socio-economic ingredients in with the massive spending cuts set to automatically take effect in January 2013, and the world we know seems to be spinning out of control.
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About the Book
The continuing U.S. Government’s debt ceiling crisis is an anomaly characterized by a dysfunctional Congress that previously approved the budgetary expenditures for a multitude of government programs that now requires that same body to approve raising the ceiling to pay for those same program expenditures. The U.S. Treasury then dutifully raises the necessary cash to pay these bills and maturing debt through selling (auctioning) an ample supply of various marketable debt securities (bills, notes, bonds and TIPS) through Treasury’s “Fast Money Tree.” Treasury's goal is to sell or auction its securities at the lowest possible cost to the taxpayer in order to finance the U.S. government's operations and make up the difference between government revenues (taxes, fees, etc.), and the actual program costs. To accomplish this essential mission, Treasury sells (through approximately 280-300 auctions each year) approximately $7 to $8 trillion in marketable debt in the global financial markets to 21 Primary Dealers and over 200 other entities that include foreign central banks and hundreds of thousands of retail investors through a remarkably fast, efficient, and robust electronic system - the Treasury Automated Auction System ("TAAPS"), which I refer to as the “Fast Money Tree”. Simply put, Republicans want to decrease government borrowing and spending without raising taxes to stimulate economic growth, and Democrats want to also decrease government borrowing and spending, while increasing revenues (e.g., taxes on the very wealthy and ensuring that everyone pay their fair share of taxes. This book also argues for a sensible balance between spending cuts and increased revenues in order to promote economic growth. In any case, the “Fast Money Tree” must persist in carrying out its essential mission to raise the cash needed so the U.S. Government’s essential government operations can continue unabated.
About the Author
Dr. Sunner has worked in various federal, state, regional, and local government programs for over 40 years. He also served as an Officer in the U.S. Air Force during the Vietnam War. He accepted a career appointment with the U.S. Treasury in 1988; he holds a Master's and Ph.D. in Political Science with specialties in Public Administration, Constitutional, International, and Public law. His doctoral dissertation dealt with “Newsmen’s Privilege, and First Amendment Rights.” He has published several articles on debt collection and Treasury debt financing (1985-1995), and co-authored an article (1999) explaining the fungibility of Treasury interest payments for inflation-indexed securities (TIPS). In May 2004, he published an article on “Continuous Improvement in Treasury’s Debt Management Program.” He also co-authored a publication in 2007 entitled “U.S. Treasury Auction Compliance: How Dealer Visits are Conducted, What is Discussed and Treasury Expectations for Auction Participation.” He and his wife Jennie reside in Springfield, Virginia, and they have two sons, William and Stephen, and a beautiful granddaughter, Sadie Cate Sunner.