Coming Soon in 2017: The MAGAbond aka Federal Municipal Bond Program

by John Galt
January 2, 2017 20:50 ET

magabond

The problem with most American economists and politicians is that their public persona and ideological rigidity prevents them from thinking outside the box. Hell, I was guilty of that during the election using my experiences in life and historical observations attempting to view the Donald Trump phenomena via the Libertarian microscope only to be shocked that the American public saw something different: A savior of our nation and system.

Thus when President-Elect Trump starts meeting with minority leaders on the issue of economic problems within the inner city, along with major league players in finance and business who are also a part of his Cabinet, the only logical approach is to also get outside of the box to view national economic problems through the Trumpian viewpoint.

President-Elect Donald Trump is America’s next soundbite President. He will read about stories from his preferred sources, discuss solutions with his team, and concoct some ideas of his own that will be remolded into the programs which will define his Presidency. Some will be brilliant and viewed as “why didn’t other Presidents try this?” Others will be viewed with disdain and disgust as several months after they fail some second rate aide will be terminated for Trump’s idea being pinned on him for the program becoming a disaster. That’s the way the next four years will flow and do not doubt me on this.

The one idea however which will have a long term, lasting impact on the American economy is something that has been discussed on the periphery but never formulated into an official policy or program yet to rebuild America’s inner cities and infrastructure.

Meet the “Make America Great Again” Bond or MAGABond for short.

Although the program is undefined at this moment, here are my ideas on how this could work (tax free, of course):

  1. Federal Government insured Municipal Bonds – This option would be provided to cities and counties where special projects which improve the infrastructure but could be funded locally at higher than normal rates. The idea is that a Federal insurance program could drive rates down .50-1% from a 5-6% norm on 30 year bonds, less so on shorter term paper. This gives the localities the backing they will need to upgrade airports, roadways, utilities, and other projects which provide qualifying potential economic returns in excess of the project cost over the duration of the paper.
  2. Federal Government insured Municipal Bonds with Matching Funds also issued to specific hardship cases – For example, Detroit, MI decides to finish tearing down dilapidated projects and build modern, police patrolled and secured government housing programs with on site schooling, modern infrastructure and job development programs for the inhabitants. If Detroit, which has already defaulted in the past tried this their market rates would be realistically in excess of 9-11% on 30 year paper; with Federal backing plus matching funds via a Federal Municipal Bond for the specified project(s), the rates could be suppressed and investors would view this as an appetizing prospect especially with a 6-7% yield on the local paper and matching Federal bond with a 100bps over 30 year yield rate for the Federal Muni-bond.
  3. No local bond issuance, straight Federal Municipal Bond issuance – This would be for multi-locality and multi-state programs such as new interstates for commerce with paralleling high speed rail and pipeline construction. It could also be used as a “distressed community relief bond” in lieu of direct grants to corrupt local governments where Federal oversight with private partnerships might be beneficial to the citizens of the community. This is where the private-public partnership could pay off with some profits realized from the bond issuance used to ensure profitability for private partners helping in distressed locales. This program would give investors a powerful non-GSA bond with Federal guarantees and could even be issued with 50 year terms at 5 to 9% plus yields providing relief to the beleaguered pension fund programs.

In addition, re-issuing savings bonds or MAGASavingsBonds in $25-$1000 denominations for children and their parents to invest with decent returns could restart the idea of children learning about savings and investments at a young age thus feeling as they are doing their part to support President Trump’s innovative infrastructure programs in their own communities.

While this program might sound insane to the bond vigilantes and debt hawks, in reality it might be the only way to create a viable investment alternative in the diminished regions of the nation, especially in the Rust Belt, to revive and prepare all of the nation for the upcoming technology revolution we are about to enjoy. It could help save some of the pension programs versus government takeovers, prepare cross country innovations like ten lane interstates capable of supporting self-driving tractor trailers, or high speed cargo self driving railroads with 1 to 2 day non-stop service, and better yet relief for the current overwhelmed highway systems in our nation today.

It is time for America to plan for 2030. It is time to invest without ballooning the national debt as Obama did.

It is time for the Magabond.

 

Comments are closed.

%d bloggers like this: