Think about what this means in a practical way. Investors and savers are now paying banks, governments and institutions to hold their money. Are there no real investments or savings vehicles that provide a risk free return? Why are there no such vehicles? Quite simply, one could conclude that there are few legitimate investment and business opportunities - and they expect the ones available, to lose more than the negative returns offered by the banks etc.
There is a profound message here. Nobody believes that the economy in abstract terms will improve, while high expectations also exist for asset values to collapse, Well, the mathematics supports this conclusion, as when the rate on 30 year bonds rises from 1% to 2%, 3% or worse; the market value of these bonds stumbles by 50% or more.
Moreover, we all know that rates cannot be sustained at this level forever, as lurking behind the curtains is a bogey man-- cost driven inflation caused by fewer resources and higher populations' demand. The whole situation just does not pencil out using the abstract conventions of failed neo-classical economics.
Buying a farm is beginning to look like the most prudent course - just make sure you control the country too.
Dr Peter G Kinesa
December 12, 2012