The US administration is looking into issuing military treasury bonds to fund anti-Corona virus measures.
According to ArabiaNet, Larry Kudlow, director of the National Economic Council at the White House, explained that the primary goal of these bonds will be to bridge the potential deficit in the public budget, because of the amount of money that the Federal Reserve pumps into the markets to stimulate the economy.
He told CNBC, yesterday: "As far as I'm concerned, I think it's a great idea." It will be an attempt to keep families, individuals and businesses able to cope with the virus. This will be a long-term investment in the future of the US health, safety and economy.
Janet Yellen, the former Federal Reserve Chair, said on Monday that war bonds may be the appropriate approach to fighting the coronavirus, explaining that the federal government will face a massive deficit. They are already earning about a trillion dollars this year. Now, we may expect a deficit of two trillion dollars. So thinking about how to fund these measures is worthwhile, and war bonds may be an appropriate approach.
The government is likely to issue $ 1 trillion in war bonds, and for maturities of up to 30 years, to finance the federal deficit resulting from the response to the Coruna epidemic. Bond yields are expected to reach 2% annually.
Some investors fear that the Federal Reserve may cap Treasury yields along the yield curve.
Generally speaking, the Federal Reserve cannot guarantee that it will keep bond yields for 30 years at a limit of two percent, or less, permanently. However, the Fed can determine the yield curve if the level of inflation remains at - or above - a certain threshold, or when economic growth crosses a certain threshold. The move would reduce the risk of acquiring long-term Treasury bonds, and make war bond issuance more palatable to a larger segment of investors, according to the Middle East.
Many experts believe that the United States is fighting a fierce war against a virus that has virtually stopped economic activity, causing immediate unemployment and a possible drop in Q2 GNP of 30 percent or more. War bonds are helping to provide a new funding channel for the federal government to fill its federal deficit, and to give it more time to restore its economic recovery.
This is not the first time that the US government has issued war bonds. It issued this type of bond during the First and Second World Wars. The government even went further, requesting financial aid from some celebrities during World War I in 1917. A large number of American citizens purchased bonds to help the country win the Second World War.
Despite all the economic crises that the United States has gone through ...
