USA: For First Time In History Debt Interest Drops Below 1%

[Economy 52,930]

https://www.bnnbloomberg.ca/for-first-time-in-150-years-world-s-benchmark-bond-is-sub-1-1.1399740

 

For the first time in history US 10 year bonds briefly touched below 1% in their yields during trading

 

This is the first time in history they have fallen this low. 

 

In addition to the large Rate Cut yesterday by the fed, ongoing concerns about the economy and corona virus has caused money to surge in "safe investments"

 

In some Countries around the world rates have dropped below 0% into the negative like Germany for example and most of other European Countries bonds are little above 0%

 

 

[Fatigay 21,211]

What does this mean.. We are baby.. 

[StarstruckIllusion 53,580]

You can’t just post things like this and expect us to know what it means lol

[GagaTheExplorer 3,053]

41 minutes ago, StarstruckIllusion said:

You can’t just post things like this and expect us to know what it means lol

4 more years of Trump

[Economy 52,930]

2 hours ago, StarstruckIllusion said:

You can’t just post things like this and expect us to know what it means lol

To me this is just basic Economics and markets

[Economy 52,930]

2 hours ago, thierryrreiht said:

What does this mean.. We are baby.. 

Long story short the Fed rate cut influences general cost of credit down like variable rate mortgages and lines of credit for example

 

The lower bond yields affect stuff like fixed mortgages

 

And this also means the Government is paying almost 0 interest on its debt right now

 

But America will still run big deficits even with interest rate relief

[AmericanxDream 2,049]

 

[Chromatic Lover 868]

3 minutes ago, Economy said:

Long story short the Fed rate cut influences general cost of credit down like variable rate mortgages and lines of credit for example

 

The lower bond yields affect stuff like fixed mortgages

 

And this also means the Government is paying almost 0 interest on its debt right now

 

But America will still run big deficits even with interest rate relief

As long as the US has the world reserve currency, and it's debt is cheap to service, do American politicians think that the debt they are taking is no problem? They can print all the money they want because it's inflation is exported, if that made sense. Or is it more complex than that? 

[gaganime 18]

Hopefully the economy collapses soon. I've been waiting since 2008 for a correction.

Something tells me this one will be far worse than 2008.

 

[coekane 5,921]

Oh snap. I wonder how this happened 

[Economy 52,930]

34 minutes ago, Chromatic Lover said:

As long as the US has the world reserve currency, and it's debt is cheap to service, do American politicians think that the debt they are taking is no problem? They can print all the money they want because it's inflation is exported, if that made sense. Or is it more complex than that? 

Basically in my view the argument that debt doesn't matter to the US because it's the reserve currency is only partially true but not fully true

 

Reserve currency status does give the US a higher debt tolerance than a typical nation. Investors have trust in a currency that is seen as safe, and a Country that can print its own currency worst case scenario (unlike the EU where Countries share a single Central Bank)

 

But this higher threshold still has its limits... It still needs to attract enough investors to fund the debt and if it got large enough, like a ponzy scheme it would be tough to get an exploding need for liquidity

 

Reserve Status also helps export inflation as u said but again there's limits to this

 

The basic math that determines bond yields and prices as well as how they are sold are the exact same as in other Nations. Being the reserve currency doesn't change that

 

So it's more phychological and a perception of safety than anything else

 

The only Country in the world that has ever surpassed a Debt to GDP ratio of over 160% without going into a full blown financial crisis is Japan (currently at 230%) but they too have some unique circumstances that give them a high tolerance to handle high debt

 

I would say the US special status would definitely allow debt loads above 160% perhaps without a crisis

 

But at some point the system would implode either with really high interest rates required to raise the cash or high inflation from so much printing that that inflation couldn't all be exported

 

I definitely don't see even the US getting a debt of 300% of GDP without a full blown crisis... Not that anyone can really say for sure at what point a crisis would be triggered tho

 

The US is still quite a ways away from that tho. With the debt a little under 110% of GDP... The debt could easily probably increase another 50% in total without even accounting for future economic growth and inflation

 

If the debt was $30 Trillion now, the US could likely still handle it

[pachinko 10,757]

The only Economics I want to hear about are Gaganomics! 

[Chromatic Lover 868]

3 minutes ago, Economy said:

Reserve currency status does give the US a higher debt tolerance than a typical nation. Investors have trust in a currency that is seen as safe, and a Country that can print its own currency worst case scenario (unlike the EU where Countries share a single Central Bank)

 

But this higher threshold still has its limits... It still needs to attract enough investors to fund the debt and if it got large enough, like a ponzy scheme it would be tough to get an exploding need for liquidity

 

Reserve Status also helps export inflation as u said but again there's limits to this

 

The basic math that determines bond yields and prices as well as how they are sold are the exact same as in other Nations. Being the reserve currency doesn't change that

 

So it's more phychological and a perception of safety than anything else

Thanks...this really cleared it up. 

I had this weird theory about the US. You ever think that the reason there is so much income inequality where the rich hoards most of the money while the middle class struggles is to prevent more dollars from chasing products which would lead to inflation? I don't know if I'm making sense here? Hence probably why Healthcare as one example is so expensive in particular. I feel like there is a bigger issue that we as average people don't know about the financial system completely. 

We should make a thread or something about this probably since this isn't really the topic you're originally talking about. 

 

[Economy 52,930]

10 minutes ago, Chromatic Lover said:

Thanks...this really cleared it up. 

I had this weird theory about the US. You ever think that the reason there is so much income inequality where the rich hoards most of the money while the middle class struggles is to prevent more dollars from chasing products which would lead to inflation? I don't know if I'm making sense here? Hence probably why Healthcare as one example is so expensive in particular. I feel like there is a bigger issue that we as average people don't know about the financial system completely. 

We should make a thread or something about this probably since this isn't really the topic you're originally talking about. 

 

I think there's many many factors that are influencing wealth inequality

 

Some claim bad monetary policy contributes to it

 

I don't think it's half as big a factor as regressive taxes, Corporate tax evasion or us being unprepared for automation but I do think asset distortions that monetary policy can cause can potentially be causing at least some influence as well