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3.5% would be defeated by 7%, that's right. What's the going-rate for US bonds again, right now? It's like 0.1%, right? And hasn't been above 3% since the ea
by jbooth 10y ago
3.5% would be defeated by 7%, that's right.
What's the going-rate for US bonds again, right now? It's like 0.1%, right? And hasn't been above 3% since the early 80s, if I remember right?
- beat 10y agoSomeone made a really interesting point a while back, I don't remember who - that the economy needs deficit spending, because it creates those T-bills. They're the safe investment of last resort. Think of the triangle of risk/liquidity/return - US bonds are the lowest risk except for actual cash, with very high liquidity. If US Bonds fail, it's because the entire economy collapsed. The dollar would be worthless, the government no longer in control. If you don't trust stocks, real estate, gold, etc, then T-bills are for you. Take away the deficit spending, and you take away the safe haven for money to retreat when things start destabilizing in the higher-risk categories. So all the "magical thinking" economics that starts with the assumption that deficit spending is evil and we should have zero deficit? There are consequences beyond the taxpayers paying interest here.
- jbooth 10y agoNot to mention, the social security surplus is entirely invested in those bonds and has been for 80 years or whatever. They'd have to figure something else out if there were none for sale.
- lintiness 10y agoyou're the one who posted the return on these bills. it's pretty clear they need to figure something else out anyway, right?
- jbooth 10y agoNot necessarily. They're looking to stash the money someplace safe that keeps up with inflation, not to make gains.
- camperman 10y agoInflation in the US is 0.1% or less? Uh huh.
- jbooth 10y agoMore like 1%. Sometimes the rate is higher than inflation, since 2008 it's been lower. The point is that SS administrators would rather lose a small amount of value than put that giant-ass lump of money into the market. It creates risk, and more importantly, creates a situation where the government is manipulating stock prices with their picks due to the massive size of the trust fund.
- AnimalMuppet 10y agoI don't think that creating the safe investment of last resort is really part of the Treasury's mandate, however...
- beat 10y agoNo, but keeping the economy working is part of Congress' mandate. If zero deficit would actually harm the economy, then it's irresponsible to push for it.
- AnimalMuppet 10y agoFair enough. I don't buy "lack of super-safe assets" == "keeping the economy working", though.
- camperman 10y agoRight. And it's not like the bond market is in a massive bubble or anything is it? And house prices can go up forever too, right?