We will see what happens when nobody wants to borrow money from them
dow jones
- Thread starter Jkloc420
- Start date
When we had high inflation in the late 70's the U.S. government financed its operations with long term 10 and 30 year bonds. But due to all the money printing and erosion of the Dollar long term bonds with lower yields are no longer in favor. Countries and individuals investing in them lose money. The Federal government today is being financed with short term Treasury bills. Allows taking advantage of rising interest rates while not getting too hurt by inflation. Also means the servicing of our debt has almost tripled in the last two years. We are on borrowed time as the debt increases.
The Fed really dropped the ball and screwed us over big time
They waited too long to start raising the interest rates, then they was forced to raise and fast
But the biggest mistake was they took out a lot of five year treasuries a couple years ago to finance the debt instead of long-term treasuries when the interest rate was next to nothing
True, but that's the problem. No one wants to buy long term bonds that pay almost nothing. Inflation, even modest inflation, eats up your investment over time.
Well whatever 3 years ago you got almost a zero on anything
People who snapped up on 2% long-term bonds
Up In Smoke
Well-Known Member
Bonds don't have to be held to expiration. I believe anytime after 1 year with a penalty.
....are missing out on higher interest. It's why short term Treasury bills are how the government is now having to finance everything and are getting eaten alive servicing the debt.
A lot of those Banks but long-term low interest treasury bonds and they also went out of business.
Mark to market made people panic
So which would you buy? A one year T-bill that pays more interest or a 30 year T-bond that pays less interest and you're penalized to get out of it? It's why we're now paying almost a $trillion annually to service the debt.
Up In Smoke
Well-Known Member
I believe treasuries can be sold on the secondary market at any time.
The key thing is what is interest rates going to be one year or two or three years four years down the road from now?
But the two to seven year treasuries look attractive
If you buy them on a secondary market not if you buy them from treasury direct
The extremely low interest rates were an aberration. Likely not happening again anytime soon. But as long as short term Treasuries are paying attractive rates it's not likely T-bonds are going to be attractive to very many.
Governments would gladly buy a bond paying 15.21% interest safely for 30 years over short term ups and downs. The government paid for it's operations back then selling mostly long-term bonds. It's almost entirely short term bills now.
Short-term rates are going to go down
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How so?
The FED is going to start cutting rates
Could take them years to get us back to two percent inflation.
