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Why build a factory today if you can buy your country's bonds and enjoy a risk-free x% a year? Why buy a smart phone today if you can wait 1 year and get a muc
by nandemo 13y ago
Why build a factory today if you can buy your country's bonds and enjoy a risk-free x% a year?
Why buy a smart phone today if you can wait 1 year and get a much better one for the same price?
- deleted 13y ago[deleted]
- RockyMcNuts 13y agoThe short answer is, you don't. When real interest rates are at 5%, that is not normal and those are not usually good times. Bonds in the US have earned a real 2.3% since 1926. From 1937 to 1981 bonds lost a real -0.72% per year. You don't buy bonds to earn the rate of growth of real GDP or better. If you want to do that, you have to take risk. The last 30 years of declining inflation have been the anomaly. People built businesses instead of buying bonds because bonds looked pretty unattractive, but when inflation kept surprising to the downside, bonds did better than expected.