The Gov Should Promote Savings Bonds

by James & Miel on March 14, 2009


Hi All,

It seems to me the feds should be doing more to promote the sales of US Savings bonds. Savings bonds are kinda old fashioned, but they’ve been a classic means of funding government when our nation was in hard times or had a great challenge to overcome. Aside from the recession, there are also a number of compelling reasons why selling them makes sense.

First, bonds can help improve the deficit. The White House is planning on running a deficit of nearly 1.75 trillion dollars for 2010. Nearly all of this has to be borrowed. Rather than relying solely on sovereign governments for this funding, it would seem to make sense to pay for a chunk of it by direct bond sales to the general public. This would help to give our leadership more options by keeping some of the debt here at home.

Second, bond ownership is a good investment. The rate on some bond types is currently far superior to conventional savings instruments like CDs and money market accounts. For example, the current rate on series I bonds is 5.64%. This beats the heck out of available alternatives, the best CD rates are yielding 2.65% for 5 year instruments and money market accounts currently give you 1.4%. That increased return will help you at the very minimum maintain your wealth and at best build up your wealth.

Third, bonds will improve the household savings rate. The US savings have been getting better, but is still very low historically. A higher savings rate will improve peoples ability to invest in themselves, their communities, and their local business environments. Since jobs are scarce, it would seem that improving peoples capacity to invest in human and social capital certainly wouldn’t hurt.

Just to give you a sense of what I’m talking about, here an old clip from the 1970s. Its got John Wayne promoting a federal savings bond program. Now, Wayne was a bit of a jingoist, but the clip is a good example of the type of program I’d like to see – minus the ra ra jingoism of course.

p.s. We buy $50 worth of bonds monthly.

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