Posted on 01/15/2015 6:38:42 PM PST by MeneMeneTekelUpharsin
Investors are so nervous that they are basically willing to lose money when they buy some government bonds. It's part of the latest fad in finance that's all the rage: "going negative." The yields on government bonds in Europe and Japan have dipped into the uncharted waters of negative territory. That means buyers of those bonds are essentially taking a loss just to hold onto those assets. They think their money is better off losing a few cents than putting it elsewhere. "It's basically a fee for fear," said Nicholas Colas, chief market strategist at ConvergEx. "Fear of deflation, fear of volatility in other capital markets and general fear of the known."
Below zero: Just look at Switzerland, where the yield on bonds fell further into negative territory this week after the country's central bank dropped a bombshell on investors by scrapping a currency cap. In addition to allowing the Swiss franc to trade freely against the euro, the Swiss National Bank lowered a key interest rate further into negative territory, from -0.25% to -0.75%. That's like a bank charging customers to park their money there instead of paying them interest. Switzerland isn't alone in going negative. The yield on short-term government bonds of Belgium, Denmark, France, Germany, Japan, and the Netherlands are all sub-zero. Even short duration U.S. bond rates are barely above zero.
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(Excerpt) Read more at money.cnn.com ...
Follow up question. In that situation where *should* folks be putting their cash?
This is all a hypothetical discussion, of course. The government of this country will go to whatever lengths necessary to prevent this type of scenario. Many of the government policies that prevail under both Democratic and Republican leadership are aimed precisely at warding off a deflationary cycle here in the U.S. Two policies in particular that fit this description -- "open borders" and "free trade" -- are perfect examples of this.
I don't think free trade and open borders helps deflation. LOL. If anything they decrease prices and wages. A double bagger deflator.
I think they've known it for a long time.
The purpose of free trade is to prop up the value of the U.S. dollar by increasing the number of businesses and customers around the globe who use the dollar for conducting business.
They dilute the labor pool lowering wages. This is deflationary.
The purpose of free trade is to prop up the value of the U.S. dollar by increasing the number of businesses and customers around the globe who use the dollar for conducting business.
We save a few pennies on the dollar on imported retail prices. This is deflationary too.
PGP 11+% a year -— pays monthly. Sells at a market premium of +50% of nav but it has for the last 10 years.
No, it's not. If I have 10 employees earning $20/hour and I replace them with 50 employees earning $5/hour, my employees now have an extra $50/hour in purchasing power.
We save a few pennies on the dollar on imported retail prices. This is deflationary too.
And we purchase more products at the lower prices than we did at the higher prices. People living below the poverty line in the U.S. today have a better standard of living than someone in the middle class did even as recently as 25-30 years ago.
The purpose of open borders is to increase TAXES and they do that by bringing more “customers” here into the U.S.
There used to be negative amortization mortgages. You could pay on it for ten years and end up owing more than when you started. They were outlawed after the S&L crises in the early 90s.
It was a beeeatch. People couldn’t refinance ‘cause their homes didn’t appraise for what they owned on it.
To clarify;
The purpose of open borders is to increase TAX REVENUE and they do that by bringing more “customers” here into the U.S.
Thanks!
buy a bond and lose money... that oughtta sell a lot of bonds, lol
I didn’t say it was a good idea. I’m saying that’s how it works.
That’s part of it ... because government is one of the “industries” that constantly needs more customers.
Part of it?
Get real...
I can assure you that the U.S. Chamber of Commerce doesn’t give a flying crap about tax revenue when they spend millions of dollars lobbying in Washington for open borders.
I hope this wasn't too insensitive.
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