In a time of debt ceiling talks...

From JW Mason, number 12, from 2019:

Financial markets depend on Treasury debt as a safe, liquid asset. Federal government debt offers an absolutely safe asset that can always be sold quickly and at a predictable price – something that is extremely valuable for banks and other financial institutions. There is a strong argument that the growth of the mortgage-backed security market in the 2000s was fundamentally driven by a scarcity of government debt – many financial institutions wanted (or were compelled by regulation) to hold a substantial amount of ultrasafe, liquid debt, and there was not enough government debt in circulation to meet this demand. So financial markets came up with mortgage-backed securities as a supposed alternative – with disastrous results. Similarly, after the recession, one argument for why the recovery was so slow was a “safe asset shortage” – financial institutions were unwilling to make risky loans without  holdings of ultrasafe assets to balance them. While these concerns have receded today, there is still good reason to expect a “flight to safety” toward Treasury debt in the event of a new crisis, and government debt remains important for settling many financial contracts and pricing other assets. So strange as it may sound, there is a serious argument – made by, among others, Nobel prize winner Jean Tirole in his book on financial liquidity — that increased government borrowing would make the financial system more stable and increase access to credit for other borrowers.