This Tweet by Holger Zschaepitz, author of ‘Schulden ohne Sühne?‘ a book on states’ addictiveness to debt caught my eye.
Zschaepitz’s Tweet inspired my lead chart.
The chart shows Germany’s negative-yield bond market is inverted in 19 places.
The longer you borrow, the more money you collect because the ECB pays you to borrow.
On the 3-year bond, the ECB pays you 0.667% per year to borrow. If you borrow money for 3 months you collect an annualized 0.514% for borrowing.
Central Bank Sponsored Madness
Getting paid to borrow money, could not possibly happen in a free market.
Yet, it’s now so extreme, the longer the borrow, the more you get paid.
This perversion is best viewed as central bank sponsored madness.
Mike “Mish” Shedlock
“… this whole mess, the trade war, weaker economic growth is painful, yet crazy as he is, I still would rather have Trump than Hillary!”
Still my position as well
With billion dollar election campaigns, corporations as citizens, out-of-state election financing, muckraking, you’re lucky you could choose between these two fine candidates. /s
CB’s be saying: “Take my money … please!”
Meanwhile, student loans for worthless degrees in the trillions of dollars. Yes, we know all about “value” for the oligarchs.
But credit card interest rates are at all-time highs.
No free money for you!
Trumptards have been claiming that China is manipulating its currency. From these negative yield bonds, we know who are actual manipulators. Fyi there is no negative yield bonds in China.
There is a maximum negative point. It is when insurance for storing cash costs less than the gain from borrowing. At points much higher, people will borrow money and sit on it. Some banks had already considered it. The big drawback is the huge pile of hundred-euro notes. If the ECB made million-euro notes, some banks would take the storage risk. I recall this being openly discussed.
So is there a massive carry trade going on? Get paid to borrow in Germany, convert to dollars, and go long UST at 2%?
Storing cash is what they don’t want thus the push for digital currency by governments
Hence: gold
“At points much higher, people will borrow money and sit on it. ”
People will store it in real estate, hence the sky high real estate prices worldwide, 100-year mortgages… The banks are another matter, but they were considering storing extra cash in bank vaults like in the old days.
Thank you central banksters.
“who lends on this basis and to whom? Is it typically just corporate borrowers?”
This is a central bank perversion. Negative interest rates are illogical and cannot happen without direct manipulation.
It is difficult for the average Joe to take risk-free advantage because deposit rates are even more negative.
One could borrow money and keep it in the house, but the risk is theft. One could speculate, but that isn’t risk-free.
Yes, it is crazy. No, it did not spur lending as the ECB wanted.
I just started working for a startup that needs more money. I’m going to suggest alternative means of getting more money. Venture capital is so 1990s.
Companies are using cheap money to buyback stock. I guess the price could go to infinity if they take enough shares out of the float.
Excuse my ignorance but who lends on this basis and to whom?
Is it typically just corporate borrowers?