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There's a multitrillion-dollar black hole growing at the heart of the world's financial markets. Negative-yielding debt -- bonds worth less, not more, if held to maturity -- is spreading to more corners of the bond universe, destroying potential returns for investors and turning the system as we know it on its head. Now that it looks like sub-zero bonds are here to stay, there's even more hand-wringing about the effects for mom-and-pop savers, pensioners, investors, buyout firms and governments.
[...] Negative-yielding debt topped $13 trillion in June, having doubled since December, and now makes up around 25% of global debt. In Germany, 85% of the government bond market is under water. That means investors effectively pay the German government 0.2% for the privilege of buying its benchmark bonds; the government keeps 2 euros for every 1,000 euros borrowed over a period of 10 years. The U.S. is one of the few outliers, with none of its $16 trillion debt pile yielding less than zero, but across the world, strategists are warning that the problem may get worse.
(Score: 2, Troll) by jmorris on Sunday July 14 2019, @04:18AM (7 children)
They have to move all money to electronic storage to make this insanity even wobble along for a few more years. Pallets of cash "earn" more than bonds, even after accounting for the security and insurance. So it has to go, because we must have a fully debt based money. Why? Who said so? Don't ask, just obey.
(Score: 4, Funny) by krishnoid on Sunday July 14 2019, @05:12AM
Or let it trickle down in more productive ways [dilbert.com].
(Score: 5, Interesting) by ilPapa on Sunday July 14 2019, @05:38AM (4 children)
No, that's not how it works. Those bond rates are so low because of the efforts of all central banks (including Donald Trump's captive Fed) to lower interest rates, forcing money from banks and the bond market into riskier assets (stocks) so that it looks like the economy is just humming along when we've actually been in a recession since 2017. When the world has figured out that the employment numbers are bogus (because the number of people not looking for work don't get counted and that number has been growing steadily since 2017), and the degenerate president in the White House likes to think the Dow Jones average is the report card for his performance in office, then the only thing left to do is hope for increasingly bad economic indicators and hope that the Fed keeps cutting rates and the Dow keeps rising. It all works until it doesn't and then there's nowhere else to go.
It's all misdirection, and your pallet of cash is steadily losing value at approximately the same rate as those negative-return bonds. Real inflation is running 8-10%. I wish I was making this up.
http://www.shadowstats.com/alternate_data/inflation-charts [shadowstats.com]
You are still welcome on my lawn.
(Score: 0) by Anonymous Coward on Sunday July 14 2019, @06:12AM
I hardly ever share your opinion, but I think you are right on the money here.
The whole process is designed to boost money flow into the stock market (at least since St Obama's time). An earlier poster wondered why Netflix seemed to have an unlimited credit line to lose money, this is it.
(Score: 1, Troll) by jmorris on Sunday July 14 2019, @06:43AM
No argument that cash depreciates at the inflation rate, that being the definition of inflation. But that is less than the return of negative interest, which was my point. That pallets of cash in a vault outperform bonds, and that ain't sustainable.
Everybody knows the problem with deflation is that it creates that 'knee' in the charts as the rate of return slides below zero and simply holding cash becomes a better move. It causes savings and investment to distort and then just dry up, leading to an economic crash. Our super geniuses think that if they do what no previous civilization facing this problem could, just eliminate the cash option, that the math will continue to just work and allow negative inflation rates to work exactly the same as positive rates.
Not sure what is up with the employment numbers. By the book everything is great. It isn't just unemployment that is down, which is where you think the trickery is. Look at the total employment number as well, it too is a record. But does it FEEL like record employment is out there in the real world? If everybody has jobs, why is the government still going broke sustaining the same massive welfare state? Why is everyone feeling a disturbance in the force? Something ain't right. After Obama's gang got through it is doubtful ANY economic measure the government publishes is worth the pixels they print it on now.
As for stocks, they crash in a couple of months. Take that to the bank. Actually that that to your broker and SELL ALL THE THINGS! The only way the 2020 elections are even interesting is if there is a recession, so there will be a recession. Progs easily control enough levers of the system to trigger one on demand. They tend to last 12-18 months and it needs to still be going in the Fall of '20 when voters get set into a choice. Do the math. When it crashes buy everything back while it is "on sale."
(Score: 2) by JoeMerchant on Sunday July 14 2019, @02:53PM (1 child)
My favorite tidbit was the depreciation twist they put in the tax code after the Trumpinator took office. Want to buy a bauble, like a sailboat "investment" somewhere tropical. Well, now, you can fully depreciate your investment in the first year, no more waiting for depreciation to approximate market values - take your tax holiday right here right NOW and make our leader look GREAT on talk radio.
Nevermind how we're going to keep this farce going, we're all gonna die soon anyway, let's have a party before the shit really hits the fan.
🌻🌻 [google.com]
(Score: 0) by Anonymous Coward on Sunday July 14 2019, @03:39PM
What are you rambling about? This is a discussion of monetary policy, not fiscal policy (which is relatively unimportant and mostly a distraction).
(Score: 2) by inertnet on Sunday July 14 2019, @12:26PM
Right, it's simply to make it much easier to steal your money (and it's gone [youtube.com]).
Artificial inflation to steal 2% a year apparently isn't fast enough.