Well, things aren’t looking so great out there now. Courtesy of ZeroHedge (who else?) we learn that the US Treasury Department’s “Borrowing Advisory Committee” (headed by Ashok Varadhan of Goldman Sachs and Matthew E. Zames of JP Morgan Chase) has decided to make the following announcement:
There was a lengthy discussion regarding the bid-to-cover ratios at recent Treasury bill auctions. It was broadly agreed that flooring interest rates at zero, or capping issuance proceeds at par, was prohibiting proper market function. The Committee unanimously recommended that the Treasury Department allow for negative yield auction results as soon as logistically practical.
That’s right. They will soon begin charging you outright for holding Treasury Bonds (rather than just allowing inflation to eat away at their worth), which means we will join Denmark and Germany in the pool of evidence that our economic system and way of life is completely collapsing. Pretty soon they will begin charging you for money held in your savings account and forcibly convert your retirement investments into negative-yield Treasuries. Free checking? What is free checking?
That this is being floated right before Facebook’s IPO is pure coincidence.
The US has already been issuing inflation-protection bonds at negative yields, oversubscribed 3:1. That means people are so worried about getting any of their money back that they are willing to pay a premium to be first in line to collect after the economy collapses. I guess those who couldn’t get any bought gold. But the gold will eventually be confiscated, so oh well.
Nothing to see here, folks. Go shopping!