TITLE

Life Without Treasury Securities

AUTHOR(S)
Wojnilower, Albert M.
PUB. DATE
October 2000
SOURCE
Business Economics;Oct2000, Vol. 35 Issue 4, p10
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
The U.S. Treasury debt may soon be paid off. However, Treasury securities perform vital and difficult-to-replace roles: as riskless assets in portfolios; benchmarks in the pricing of private securities; reliable hedges for marketmakers in debt securities and derivatives; safe havens for funds; and, as was formerly the case with gold, the chief international money. If and when Treasury debt is paid off, the loss of Treasuries in these roles means that securities markets will shrink, while banking-type intermediaries gain. The perceived probability of governmental bail-out for various kinds of debt in case of trouble will determine winners and losers among candidates for replacements, with foreign central banks making the pivotal choices. Retirement of Treasuries--especially short-term bills--is monetary destruction. What instruments take their place and how completely and smoothly, will have profound worldwide repercussions. Thus, the U.S. Treasury should maintain some debt, despite the budget surplus.
ACCESSION #
3765377

 

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