Alternatives jor Debt Management

Public debt management, in the sense of manipulation of a given stock, has been a policy problem at least since World War II. During this time, dissatisfaction with the handling of the debt has surfaced sporadically. A feeling that the average maturity of the debt should be longer than it was has been pervasive. But no generally accepted philosophy of the public debt management has emerged. Various objectives have been urged for debt management. An anticyclical impact seems an obvious possibility. A balance of paymentsoriented debt policy, seeking to lower longand raise short-term rates, was tried in the form of Operation Twist. Cost minimization regardless of anticyclical considerations has been proposed. Most of the time a policy of tailoring to the needs of the market ("sell what they will buy," a not too distant relative of cost minimization) has been followed. A variety of theoretical approaches has been given a workout on debt-management problems. The effect of wealth on consumption -contrasting the economist’s belief that the public debt is private wealth with the banker’s view that the debt is a burden has been one of them. The theory of portfolio choice has been another. Alternative views concerning the relative weight of money and of liquid assets in the determination of aggregate demand have found application. The theory of the term structure of interest rates has attracted possibly the largest amount of theoretical attention.