Among some of the crazier stuff being discussed at the fringes of the Trump economic team these days is the issuance of “forever bonds” to refinance the nation’s staggering debt — and to do so as part of the current trade negotiations, The Post has learned.
I have been assured by people close to Trump’s trade point man, Treasury Secretary Scott Bessent, that floating these 50- or 100-year bonds isn’t close to top of mind as part of his negotiations or anything else.
“No we’re not talking about that,” one person close to Bessent told me, with an emphasis on the “No” part.
One obvious reason why Bessent would have no interest in the zany idea is that he already has his hands full negotiating myriad tariff-related trade deals with partners.
Some of those could bear fruit as soon as this week, with a possible deal with Japan looking increasingly likely.
Another is that the markets don’t need another sharp turn into possible destabilization after the administration made the centerpiece of its economic agenda a policy blowing up the global trading system.
Yet fringe discussions in government sometimes have a way of becoming mainstream.
The issuance of forever bonds was indeed looked at during Trump’s first term.
Trump’s head of the Council of Economic Advisers, Stephen Miran, has been a devotee of the forever bond as part of a trade pact that brings manufacturing and jobs back to the US.
And he’s a substantial figure in Trump World.
Miran, an economist with a Ph.D. from Harvard, is also one of the key intellectual thought leaders behind the current tariff plan.
While the super bond doesn’t appear to be part of any negotiations, last fall Miran published an essay stating it could be used in a trade deal.
His piece, titled “A User’s Guide to Restructuring the Global Trading System,” certainly caught Trump’s eye.
In it, Miran argued that the dollar is too strong, thus it hurts US manufacturing.
That’s why factories have closed and we rely on cheap Chinese goods.
To re-industrialize the country, we need to find ways to depress “King Dollar” so it’s cheaper for foreigners to buy our goods.
One way to do that is cutting deals forcing trade partners to sell all their dollar reserves, and then convert their shorter-term debt holdings into super bonds.
That, in theory, restructures the country’s debt, currently at $36 trillion, at lower rates and pushes payments way into the future.
Why go beyond 30 years?
Full disclosure: I don’t fully grasp what’s going on here with Miran’s thesis.
(His rep did not return a call for comment.)
Most of our debt is financed the old-fashioned way, with 30-year bonds being the longest maturity.
Why would anyone holding a 5-year bond want to take a risk on a 100-year bond, which means you get your principal back in the next century?
Most of my sources on Wall Street agreed that the super bond doesn’t seem so super.
It’s why they say people at Treasury backed off the idea during Trump 1.
As one Wall Street CEO who deals in credit markets for a living told me: “Why would anyone do that? . . . The cost of our debt will explode the deficit.”
The downside would be immediate, experts said.
Markets could implode over the worry that the US needs to restructure its debt load.
We would be literally telling bond buyers we can’t repay our obligations now, so we need to push out interest and principal payments well into the future.
That’s called “default” and bond yields would shoot to the moon, stock markets could crash and the economy would likely fall into a deep recession.
Heat on new SEC boss
Pressure continues to build on new Securities and Exchange Commission chair Paul Atkins to unleash the dogs of his enforcement department on China Inc., the Post has learned.
Atkins will be sworn in by President Trump early this week as Wall Street’s top cop.
His first major investigation could be to determine whether nearly 300 China-based companies — representing a market cap of more than $1 trillion — should be delisted or removed from US stock markets, according to people with direct knowledge of the matter.
The pressure comes from a variety of powerful lawmakers, including the House Select Committee on China.
Sens. Rick Scott (R-Fla.) and Tommy Tuberville (R-Ala.) were first to push the issue, with Scott telling Atkins his vote to confirm him as SEC chair was contingent on an assurance that once in office he would launch a probe into the matter.
The Post has learned that Atkins said he would.
The concern is that a probe would rock the stocks of Chinese companies if US investors get skittish over talk that the ruling Chinese Communist Party has a heavy hand in how they are run.
Following last week’s column on calls for Atkins to launch an investigation, a House Select Committee spokesman told The Post it, too, is interested in allegations of shoddy disclosures by Chinese listed companies over their ties to the CCP, and that those concerns are bipartisan.
The committee was established in 2023 to monitor US competition with China, and how the ruling Chinese Communist Party uses China Inc. to advance its strategic agenda of military and economic domination.
Executives running Chinese listed companies contend that the evidence of CCP involvement in their operations is either overblown or non-existent.
Also alleging something is a lot more difficult than proving it, which will be needed for any delisting.
That being said, given the trade war between the US and China, pressure to investigate Chinese listed companies will only grow, and could lead to stress on those stocks.
Credit: Source link
