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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: 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."