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Bizzaro World Becomes Normality: Germany Issues Five Year Negative Bond
..............Nathan McDonald for Sprott Money
The luxury of paying your government to hold your money, once thought as absurd, hilarious and downright preposterous is now a reality.
For the first time ever, Germany sold five year debt at a negative interest rate. You heard that correct, German citizens and investing institutions that wish to buy government debt in Germany, will be paying the government to hold THEIR money!
Not only does this exist, but it was a success! Last week, Germany successfully sold €3bn worth of five year bonds at a negative interest rate of 0.8 percent.
The reason for the success, is the greater than expected QE announcement by the ECB, who announced last month that they would be entering into a €60bn per month repurchasing program. Essentially telling investors that no matter the price, we’ll buy your bonds.
You can chalk this movement up as one more folly of government intervention. Another artificial market has been created, a market that will add little to no value to investors, other than speculators who are simply hoping the government will re-buy the bonds at a higher price.
Yet, investors have it all wrong. Those with the fortitude and the ability to see further than a month to month basis (an affliction that appears to affect almost everyone on Wall Street), will move into gold, knowing that these bonds are not a safety measure, but a Ponzi scheme hidden in plain sight.
Another sign that should not be taken lightly is the fact that interest rates are moving into negative territory, not only Germany, but a number of other Eurozone countries, such as France, Belgium, Finland, Denmark, Switzerland, Netherlands, Sweden and Austria.
The fact that this isn’t alarming more people is shocking. This simply builds on the trend I have been discussing, that despite record high stock prices and the talking heads who tell you everything is “hunky dory”, the world economy is not recovering, it is suffering and heading towards the edge of a cliff.
If everything is as truly good as they say, wouldn’t interest rates be much higher? Wouldn’t investors be more willing to put their money at risk, rather than fleeing to the artificial safety of negative interest rate government bonds?
Those investing in this false sense of security are setting themselves up for disaster. Uncertainty exists, despite the papering-over the markets have received.
In the eyes of Western Central planners, the problem can only be fixed by the issuance of more fiat dollars. The problem is, this theory has proven incorrect. The underlying market has not only ceased to improve since the 2008 economic crisis began, it is in a more dangerous position than ever.
One of the main reasons financial “experts” have not recommended gold is the fact that gold does not pay interest rates. Ironically, these same experts are now encouraging their clients to move into a negative paying fiat IOU scenario. An IOU that is in all reality becoming more and more worthless as governments around the world flood the market with an ever increasing supply of paper money.
Let’s put it this way…do you truly believe that governments are going to correct their ways within the next five years? Do you honestly think they are going to stop printing money and not enter into additional QE plans? Unless you live in a fantasy land, then no, you know this not going change.
On the other hand, there can only be one end result of buying and holding these newly issued negative interest bonds: hold to maturity and suffer a guaranteed loss.
Therefore, why would you NOT want to move into precious metals, an asset class that has proven itself throughout the ages to protect and preserve your wealth in times such as these?
..............Nathan McDonald for Sprott Money
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I think this is a gun at their heads saying in no uncertain terms, "buy our government bonds or we will do a baili-in. And we assure that either your compliant deposits or your brains will be in our vaults. Other wise the peoples money they thought they had in your bank will spill your brains all over the streets."
So now we have negative bond rates. Easy as pie.
"paying your government to hold your money"
LOL, no you are not. You are giving your money to the government so they can spend it on themselves and their cronies. Whether you get it back, or not, that's up to them.
I'm 100% serious. Why would anybody invest in a 5 year bond at -0.8% interest? Do they not have pickle jars in Germany?
Because European banks are required by law to buy it. Regulations have been put in to place which require banks to hold "safe" government debt as reserve - from which they may lend against.
All this garbage debt is what is backstopping the entire Euro banking system. No worries though, Draghi will print up enough garbage euro currency to take it off their hands eventually.
To take the mind-bending concept of negative interest bonds one step further, the ECB could solve the Greece problem by buying enough Greek bonds at a negative interest rate to give Greece a net interest rate of zero over its entire debt load. As a bonus Greece can end up with a few hundred billion euros extra to spend to put itself back together, or waste on hookers and feta, as it pleases.
I wonder if these bonds will be eligible for/as collateral?
The only way to end the bizarro world is to eliminate ALL privately owned banks. Over the last 5000 years thare are numerous examples of how national public banking served to benefit society's ordinary people. There really is no other solution to the current world, which has gone completely mad.
This is the world you get when psychopaths rise to positions of power.
Anyone who buys these is doing it with other people's money because they themselves are getting paid to do that as well.
A complete con
When you keep your wealth in Junk called fiat currencies- you have to pay for it.
And when you keep your real assets like Gold with your Government you can kiss it goodbye.
Make your choice. 500 years of monetary history shows that all fiat currencies have gone bust.
"On the other hand, there can only be one end result of buying and holding these newly issued negative interest bonds: hold to maturity and suffer a guaranteed loss."
Gold doesn't pay interest, but can ( for now ) and is losing value in and of it's self
daily gold chart http://finviz.com/futures_charts.ashx?t=GC gold will have it's time just not now
deflation, then inflation
Gold has positive yield in a world of negative bond yields.........be interesting if bonmd yields ever turn positive to watch capital values after all if they are blowing asset bubbles bursting them will be very painful
Pope: "Please Let It Be A Quick And Clean Death".
http://shoebat.com/2015/03/11/pope-francis-makes-this-prayer-to-god-if-t...
IJsland wil geen toetreding tot de Europese Unie, omdat netwerk Juncker nog steeds het script voor de gecontroleerde paradigma-wisseling naar het systeem 'Leven en Laten Leven' niet wil vrijgeven.
http://www.nrc.nl/nieuws/2015/03/12/ijsland-wil-niet-meer-onderhandelen-...
In de optiek van BloemigeJeroen 'is er veel verbaal geweld' die niet 'enig doel' dient'!?!??
http://www.trouw.nl/tr/nl/4496/Buitenland/article/detail/3901948/2015/03...
Het is duidelijk dat netwerk WitteGejT bezig is met ...
Only CBs will be buying them, so, who cares?
Gold has positive yield in a world of negative bond yields
negative interest rate of bunds, ha, the second best arguement to own gold after insurance.
so let us buy gold, thanks sprott, i think i get it(now). any best sellers?
Suddenly Warren Buffett's complaint that gold doesn't pay any interest has been made moot. (I used the word suddenly because I didn't want to confuse everyone by saying "Quickly" when talking about Uncle Warren).
But the German bonds are a guaranteed loss, so you at least know your being screwed going in..
OK. We definitively live in a crazy Monty Python world.
So what happens to all the pension funds with investment targets of 8% PA? Perhaps Zimbabwe Government debt will still generate the necessary returns?
its extortion money
you are paying the government so Jimmy doesnt break your legs.