Former President Donald Trump continues to apply a debt strategy that was a source of controversy during Joe Biden's administration. The new approach, known as Active Treasury Issuance, raises concerns among economists.
Active Treasury Issuance as U.S. Strategy
Reports indicate that the Trump administration is continuing to use the method of Active Treasury Issuance, which involves cutting down the amount of long-term debt sold and increasing the issuance of short-term bonds to control long-term interest rates. This approach, introduced during Biden's presidency, has faced criticism for blurring the lines between the roles of the Treasury Department and the Federal Reserve.
Warnings About Possible Deeper Intervention
Stephen Miran, chair of Trump's Council of Economic Advisers, previously described ATI as a 'fiscal invasion of monetary policy.' Scott Bessent, now Treasury Secretary, shares this view and warns of the possibility of deeper intervention if financial markets 'become disorderly.' This could lead to outright purchasing of long-term bonds, a direct move to cap rising yields.
Global Spread of the Strategy
The Active Treasury Issuance strategy is starting to be adopted in other countries. For example, in Japan, rising long-term interest rates have prompted the Ministry of Finance to develop its version of ATI, aiming to reduce long-term bond issuance while increasing short-term debt. This trend may also affect the UK, where unstable public finances could lead to similar actions.
The continued implementation of Active Treasury Issuance in the U.S. and its spread internationally raise important questions about the impact of these policies on financial markets and central banks, which could have serious implications for the global economy.
