I've been mulling the idea of COVID Bonds...

[Hugin]

They would work similar in action to the historic War Bonds.

"A Liberty bond (or liberty loan) was a war bond that was sold in the United States to support the Allied cause in World War I. Subscribing to the bonds became a symbol of patriotic duty in the United States and introduced the idea of financial securities to many citizens for the first time."

From: https://en.wikipedia.org/wiki/Liberty_bond
and: https://en.wikipedia.org/wiki/War_bond

Since financing a Federal response to the pandemic has become such an issue lately.

The proceeds from the COVID Bonds would go toward financing pandemic related liabilities and initiatives as defined by the Legislative Branch.

Now, I've bought and sold many general bonds over the years, but, I've never had much to do with special purpose bonds. Which, corresponding to the Reagan Revolution fell out of favor in the early 1980s. A move probably encouraged to drive down personal savings. It's also when the US became a so-called debtor nation.

Any thoughts?

[Sherman A1]

1. I don't think that costs are as much a factor in the short term

As is criminally inept leadership. We are the wealthiest country in the history of mankind. We have the resources, it is just a matter of how they are allocated.

[Hugin]

2. Good points.

Yeah, I hear you Sherman A1.

It's not trickling down wrt COVID, however.

Trump's hospital stay is a perfect example. The average American can only dream of having even a small percentage of those resources. These funds would also, if used properly, fund the larger public health initiatives such as making PPE available to those low income and fixed income people who find the additional expense a choice between necessities.

Hopefully, having a dedicated pool of money specified for use on only the pandemic response would focus the Federal government's attention on the need for an active drive toward getting this mess under control. The second reason would be to get the public's attention and hopefully a financial investment would carry with it a personal investment and awareness of the seriousness of the crisis.

Maybe, with Biden/Harris this won't be as severe of a problem as they've been very proactive about COVID. But, I'm anticipating some friction from the Senate if it remains in Republican hands and they'll use COVID as a wedge.

Thanks for the input!

[Sherman A1]

3. It hasn't really ever trickled down despite

the republicans insisting the it will which each and every giveaway tax cut for the 1%. Economies do better for all when those with less means do better and the rising tide lifts all the boats. I have hopes that Biden/Harris will fix many of our ills including the pandemic, but I believe that we would be best served by a universal basic income for all our citizens.

[Hugin]

4. This is true.

A basic income is most definitely the way to go in the long term. Financial security has a way of freeing people's minds to think of new ideas.

There's a rut the US has fallen into believing that making more money faster is the only purpose of any organization. Even organizations who's purpose is not at all related to generating income. What ever happened to basic research? It has deadened innovation and exploration.

[Voltaire2]

5. Huh?

We’ve been running deficits, huge deficits, since before WW2. We didn’t become a ‘debtor nation’ with Reagan.

Also bonds never fell out of favor. They are how we finance the deficit in our federal budget. Treasury Bonds are issued and bought in vast amounts every year.

[Hugin]

6. ...

I'm speaking of private debt.

American's were traditionally big savers. This saving was broken down in the early 1980s with a huge expansion of private debt via credit cards and other forms of unsecured credit. In the 1990s a gradual relaxation of the laws and regulations covering loans and credit led to highly risky loans being issued from 1998 thru the early 00s. Getting creative, the financial sector bundled these loans into high risk equities such as CDOs. I hopefully don't need to tell you the ultimate result of this foolishness starting in around 2007.

No, special purpose bonds have not been issued by the US in quite some time.

[progree]

7. Federal debt as percent of GDP stopped falling and began rising with Reagan

well, OK, a little bit of that rise started in Carter's last few months, who was in office until 1/20/81.

https://fred.stlouisfed.org/series/GFDEGDQ188S?cid=5



From 1/1/1966 to 4/1/2020

[Voltaire2]

8. sure, however the assertion that we somehow transformed into a debtor nation under reagan

is not accurate. As I said, the federal government has had substantial deficits every year since the late 30's. If the op wants to make a more accurate argument, he is free to do so. Certainly republican economic policy has driven our deficits as a proportion of GDP up to levels not seen since WWII. What they haven't done is transform us into a debtor nation. Nor is it clear that large deficits are a problem.

[progree]

9. When more and more of our tax revenue is siphoned off to pay interest on the debt

then it becomes more and more of a problem. Especially if interest rates double or triple or go up several fold -- I am absolutely not sure that this will never happen.

I used to think back in the late 70's early 80's that high inflation and high interest rates were built into the economy and would plague us indefinitely. Well, it didn't and I learned a valuable lesson about recency bias.

Nor is it clear that large deficits are a problem.

It is clear to me, unless not spending to stabilize and revive the economy -- like now -- would make the debt/deficit situation worse.

At what point do you think it could be a problem? 10X GDP? 100X GDP? Do you think we can just print the money to pay the interest forever and still have low or moderate inflation?