The US Treasury instrument is an instrument of consumption. Those investors of the scholarly infusion from your typical university believe that government debt instruments are instruments of investment like those commonly sold on the free market.
Debt instruments are contracts sold for a certain price at present, bought by an investor, with the terms affirming the reception of a quantity of money in the future. This includes a stream of periodic cash flows parceled out over time which will ultimately equal the coupon (a percentage of the face amount).
Coupons are fixed, what fluctuates on the market is the present market price. This price is speculated upon amongst investors all across the world. A trade is reached when both actors act upon the ranking most suitable to them, which is compromised on, and where both gain from the trade. This process is fully subjective.
Corporate bonds are IOUs which will be fulfilled at some time in the future, with each person partaking in the contract receiving snippets of compensation over time until the full face amount is received. At this point, the debt instrument matures.
Corporations manage their expenses by estimating their revenue stream, usually dictated by quantity of sales, as well as the value of the other defined particulars such as shareholder's equity. Accounting is an aggregation of components, and a netting out of money owed. Assets-Liabilities=Owner's Equity. Arithmetic is the more commonly organic term used; basic mathematics.
This process rendered in the private sector creates a competitive mentality that foments a wary foresight amongst the capitalist-entrepreneurs. The agio used universally, will guide the ultimate decisions of these investors.
The monopolized agio, something I have coined the monopolized benchmark, distorts all processes within the free market buying and selling of goods. The US Treasury--including all government debt instruments--is most heavily influenced by this monopolized benchmark. As a matter of fact, all rates of interest are fully distorted by this coercive agio.
Unlike the private sector, governments can issue debt instruments heedlessly. Central Banks serve as their underpin which essentially produce moral hazards. The money stock rises withering away the consumption capabilities of the monetary unit, confecting less effectiveness: lower purchasing power.
Making certain that the appropriate amount of Net Income is generated allows for the corporation to allocate it's capital properly to where costs must be fulfilled. They economize through estimates using market prices, typically nominal. Measuring the inflation rate is another educated guess. What are real profit margins?
This type of business is coined price discovery, it is something that voluntarily arises naturally on the free market.
Governments use their Treasury department to issue debt instruments which are valued according to the monopolized accounting measurements. These measurements are phony mathematical formulas that cajole people into believing governments can manage costs in the similar fashion that the private sector does.
A Government debt instrument is paid by taxing the population, this is mere expropriation. Inflation is the other more formidable occurrence which reduces monetary purchasing power by filch. Both occur when attempting to manage an economy through a coercive monopoly.
The profit and loss mechanism works best in the private sector, prodding capitalist-entrepreneurs toward forbearance. With government, or within their ambit, the profit and loss mechanism is distorted and additionally frugality is replaced by feckless frivolity.
The Government does not own the economy, and the public goods it believes we need (which are coerced upon us) can be provided more efficiently on the free market.
A transient protuberance of the money supply by injecting liquidity will result in an obscured dwindling of one's capital structure, which will ultimately result in what is an abrupt awakening.