The Art of Monetary Policy

By David C. Colander; Dewey Daane | Go to book overview
Save to active project

10

RICHARD V. ADAMS


Debt Management

Open market operations are the primary way in which the Fed conducts monetary policy. Since open market operations consist of the buying and selling of government debt, to understand the operation of monetary policy one must understand how the government securities market works. In this essay I describe the operation of one important player in the debt markets--the Treasury--and how it manages the government debt.

The U.S. government is in debt ( 1991) to the tune of $3.5 trillion. This debt has accumulated over the years because the revenues of the government have not been equal to the expenditures of the government--it is that simple. The consequences of this debt and the ongoing deficits and the accumulation of $3.5 trillion of debt have been the subject of much debate among economists, politicians, and concerned citizens, but that is not the topic of this essay. The subject here is technical: how that debt is managed so that new deficits are financed and old debt coming due is refinanced. Careful debt management is necessary so that government has the funds it needs when it needs them, and so that the cost of borrowing, in terms of interest, is held to a minimum.


Nonmarketable Debt

The government's debt consists of two general categories: marketable and nonmarketable. The nonmarketable securities are of three types: First there are the savings bonds that individuals buy. This debt is redeemable at par when it matures and interest is paid either periodically or at maturity.

A second category of nonmarketable securities is issued to government accounts themselves, such as the Social Security account. When

-121-

Notes for this page

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Notes
Cite this page

Cited page

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited page

Bookmark this page
The Art of Monetary Policy
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this book

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen
/ 218

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?