Posted on 09/17/2014 12:06:48 PM PDT by Olog-hai
Investors have bought billions of euros in German treasury notes that pay negative interest—meaning the purchasers agreed to pay a small fee for the privilege of lending the German government their money. […]
Germany auctioned €3.34 billion ($4.3 billion) Wednesday in two-year notes at an average yield of minus 0.07 percent.
Rates are very low all over, and German debt is considered ultra-safe, so security-minded investors are paying for safety. Expectation the European Central Bank will buy bonds has also driven down yields, which move opposite to prices. And the small negative yield on the notes is still a better alternative than the minus 0.2 percent that the ECB charges banks deposit money with it. …
(Excerpt) Read more at hosted.ap.org ...
Actually, what it means is that financial safety is worth a small fee.
I guess we’ll now hear Wimpy gets his cheeseburger today and they’ll pay him for it.
>> ...paying for safety
Suckers.
Investors trusting the social market economy is a bad sign.
That is what the mafia says.
Could also indicate deflation:
Investopedia explains ‘Deflation’
Declining prices, if they persist, generally create a vicious spiral of negatives such as falling profits, closing factories, shrinking employment and incomes, and increasing defaults on loans by companies and individuals. To counter deflation, the Federal Reserve (the Fed) can use monetary policy to increase the money supply and deliberately induce rising prices, causing inflation. Rising prices provide an essential lubricant for any sustained recovery because businesses increase profits and take some of the depressive pressures off wages and debtors of every kind.
Deflationary periods can be both short or long, relatively speaking. Japan, for example, had a period of deflation lasting decades starting in the early 1990’s. The Japanese government lowered interest rates to try and stimulate inflation, to no avail. Zero interest rate policy was ended in July of 2006.
Like renting a bank safety deposit box.
Probably makes sense.
Not if what you deposit in the box will be worth less than when you take it out. That is basically what you are doing if you save a fiat currency at ANY rate that balances out with inflation to less than zero.
You pay the 'fee' for renting the box and your cash gets eaten up by inflation.
Yep, just about the same.
DOH!
Or an economy so socialized and taxed that no one wants to invest in the future. A world without births is a world without hope.
Yep you nailed it. There is no incentive to tie up money in any long term productive investment so you can either go with short run safety and lose a little short run, or take a short run gamble in the casino. Even a lot of “buy and hold” equity is ending up in short term speculation beneath the covers instead of long run investments in higher productivity.
Dont they have a deflation problem with those currencies?
deflation only exists where a loaf of bread that costed 10 cents last year is selling for a penney this year... read as: NO SUCH THING.
Agreed. When corporations are using excess cash to buy up their own stock, you know we’re in economic stasis. Worse, more regulation encourages consolidation and a move to large companies away from innovative small companies.
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