With short-term interest rates near 0 percent in early 2014, suppose the Treasury decided to replace maturing notes and bonds by issuing new Treasury bills, thus greatly shortening the average maturity of U.S. debt outstanding. Discuss the pros and cons of this strategy.

The potential pros of the Treasury replacing maturing notes and bonds with new Treasury bills would be a reduction in long-term interest payments due to the lower rate on T-bills. This could lead to fewer debt service costs for the government and possibly help stimulate economic growth. Additionally, it could also provide other benefits such as increased liquidity in the market by providing investors with more options when it comes to investing their money.

However, there are some cons associated with this strategy as well. For instance, shortening the average maturity of U.S. debt outstanding means that servicing costs will continue at near 0 percent rates even after short-term rates begin rising again which could pose a risk if inflation increases significantly over time. Additionally, reducing the amount of longer-term debt may force investors out of their comfort zones and make them less likely to invest in government securities which could further complicate economic recovery efforts by decreasing demand for these bonds/notes. Ultimately, before implementing this strategy further consideration should be given as there are both possible positive and negative consequences associated with it depending on how factors like inflation or investor sentiment shift over time.