Dealing with the seigniorage loop at the Fed

Economists, like Dean Baker, want to count seigniorage against debt costs for Congress. The problem with this approach is that the seigniorage is take from the treasury market. But yhe large firms have easily closed the loop on this and priced in the real cost of money.  It is the ten year rate.

Actually what is happening is that the forward pricing is setting the ten year rate after the seigniorage stream is priced.  Government still has a term structure, like six and four year elections. Interest payment have to be made. The carel knows the depreciation cycle is ten years, and they make it so.

Look at the Bloomberg Treasury rates. Since Trumpster gained off all the rates are up 80 basis points except the five year up 32 and the ten year up 3. The interest charges are being set to match the natural budget cycles.

It is a pegged system, and will not hold with a 1-19 year slope of 75 basis points.  If Treasury keeps the curve this flat, they will pay bonus points in short term debt as it all rolls over. 

Ned wants to jump on the ten year for debt needs.  There was a tie when Treasury wanted to jump on the short end, rates were 15 basis points. Ties change and Treasury is always a late jumper.