China Deal

High anxiety these days as to whether China will continue to buy up our Treasury debt now that the deficits could close in on a stunning $2 trillion a year for a couple of years. But I have an idea. Instead of worrying about whether they’ll show up at our public Treasury auctions, why don’t we reach out to cut a deal with China directly via a private debt placement, as often happens with private companies who need cash from lenders? We’d ask the Chinese to pick up, say, another trillion or so in Treasury debt over the next few years, and let them lock in an interest rate that feels attractive to both sides.

Yes, the optics of this private placement would be unprecedented (I think) and stunning, but so what? These are extraordinary times, Chian still has big savings surpluses that need to be invested, and we need to borrow bigtime for a few years. Why worry month-to-month about who will show up to buy our debt demanding what interest rate? This would let China feel Warren Buffet-like to boot – an heroic investor at a time of crisis. Maybe as part of the deal we’d give China, for free, a big chunk of the green energy technology we want them using instead of all those dirty coal plants that could lock in emissions woes for decades. Readers who are much smarter on finance (and green tech) than I am should feel free to tear this idea apart – or improve upon it.