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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, Informative) by Anonymous Coward on Sunday July 14 2019, @04:30PM (1 child)
Deflation:
I own a manufacturing business that has to work all summer to produce enough toys to meet demand at Christmas.
In order to have enough raw materials, I have to stock-up a year in advance. The supply chain isn't quick for some things.
I have to pay my employees in today's dollars, not tomorrow's deflated dollars-- the ones customers expect to purchase those toys with.
Deflation makes manufacturing, farming, and anything else that relies on future price stability next to impossible.
(Score: 0) by Anonymous Coward on Sunday July 14 2019, @09:57PM
> Deflation makes manufacturing, farming, and anything else that relies on future price stability next to impossible.
I think you need to look into the futures market--not to gamble, but to purchase your materials at stable prices. For example, the airlines purchase jet fuel far into the future, perhaps more than a year in advance, so they can control their costs.