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Posted by / 23-Jul-2017 14:20

It is much easier to think about rising quantity of dollars, and the presumed linear effect of rising consumer prices. What does a negative yield have to do with capital destruction?

As Keith argued in the heat death of the economic universe, yields must keep falling in order to make more and more debt serviceable.

A business will always seek to borrow at lower than its return on capital (or else there’s no point).

A bid of -2% means the business wants credit to finance wealth-destroying activities.

Now imagine that this is occurring to everyone, across the entire economy. Regime apologists should not dare to tell the investor that, “well you see, you got a increased.Further to our ongoing theme of capital destruction, let’s look at a topic which is currently out of favor in the present market correction. Despite the current global uptick in rates, all Swiss government bonds out to 8-year maturity have a negative yield.Keynes called for pushing the interest rate down near to zero, as a way of killing the savers, whom be believed are functionless parasites. Hey, at least that’s a recovery from when the 20-year had a negative yield.As an aside, this is a good way to think of the dynamics of a falling interest rate.There is little demand for credit, other than on a downtick in interest rates.

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As an aside, we note that when people hear our arguments, they go through a process akin to the well-known stages of grief.