The idea the US could refinance its debt is plain stupid

There is the idea circulating in MAGA media -- and elevated by the President himself -- that there is some grand-master plan around what Trump is doing and that it's related to debt.

As the post Trump retweeted says (it also calls it a 'secret plan'):

"Why is he doing this? To push cash into Treasuries, which forces the Fed to slash rates in May and those lower rates give the Fed the ability to finance trillions of debt very inexpensively".

Where to start with this?

First of all, the Fed doesn't finance anything. The Treasury Department does. The Fed also isn't forced to do anything and I would bet against a rate cut in May.

Now that post also said "Warren Buffett said Trump is making the best economic moves he's seen in 50 years" which led to Buffett's people putting out a statement completely denying that.

It's crackpot stuff.

That said, other people are making an argument along the same lines that the Treasury will use lower rates to 'refinance' US debt.

It simply doesn't work like that.

These people seem to think that US debt is like a 30-year fixed home mortgage, where you can go to the bank with $39 trillion in debt and refinance it. In reality, the US has Treasury auctions every month in a complicated dance with markets. You simply can't buy-back a large portion of debt and then turn around and try to massively boost auction levels.

Yes, if you keep rates lower then over time you will get lower borrowing rates but we're coming from a long-term period of very low rates so whether that's refinanced at 4.2% or 4.5%, it's still going to be higher. To illustrate, the 10-year notes that are maturing this year were issued in a range of 1.6% to 2.5%.

At most, the US can bring down rates and extend duration but the time to do that was in Trump's first term or in the post-covid QE period.

In the broader economy

Now there is an argument to be made that lowering rates will help the broader economy and that's most-obvious in housing, autos and energy. The administration is having some success on that front but there are always trade-offs. The market is pricing in a recession now and I don't think many Americans would trade a 0.5 percentage point drop in their mortgage rate for losing their job or seeing their retirement savings dropping by 20%.

In the oil market, I strongly suspect that sub $60 oil will lead to less US drilling and, ultimately, higher oil prices. So bringing down oil prices in the short-term could very well lead to higher prices later.