I'm just trying to think (and talk) outside the box and take a logical stab at things. I'm not a PhD in central banking operations but i can put 1 and 1 together. Things aren't as complicated at all as some would like to present them. It's all about money in vs money out. At the end of the day, simple calculus, adding and substracting.
You can't give me a reasonable argument which is both simple and logical. That's why i keep on commenting. I WISH to hear that my logic is wrong. Desperately wish. That's the only way i'll learn. Your inability to explain yourself as simply as i am explaining my points isn't helping at all
That's quite true with both personal and government finances, however we have to be cautious not to carry this too far into thinking there is no difference between private sector and government sector finances. You and I can not spend above our income without borrowing and we can't spend before we borrow. We certainly can't create money out of thin air and get away with it. Governments can, and must do, all of these things. And good government must also assume the awesome responsibility and difficult task of attempting to supply the private sector with an optimum amount of money to carry on commerce and invest for the future. So why do so many, perhaps even a large majority of, citizens think there is something shady about Central Bank operations? I don't know the answer to that question. I suspect it has to do with our apparent, and understandable, inability to wrap our heads around the idea that government could not do the job we want it to do if it had to operate under the same constraints that the private sector must operate under.
Happy to accommodate. Your logic is wrong. The debt still exists whether the nominal interest rate is positive, negative or zero. You, as a debtor, must still return the lender's capital, or the residual in the case of negative interest rates. The interest rate minus the inflation rate determines whether you will return more, less, or the same amount of buying power to your lender as you borrowed. Regardless you must return the lenders capital plus interest. In cases of deflation, the inflation rate in the formula for real yield is negative, thus the real yield to the lender is greater than the nominal yield. If for example, you borrowed at negative nominal interest rate and the deflation rate was greater than the nominal negative interest, you would have returned fewer dollars to your lender than you borrowed when the debt is paid, but more buying power to your lender than you borrowed. You still paid a price in lost buying power for the money you borrowed, the same as if the interest rate had been positive and the inflation rate positive but less than the interest rate, i.e., the usual case. No one will lend to you if they think they will receive less buying power back than they would be loaning. Always think in terms of buying power borrowed versus buying power lent. And you'll be able to keep all this straight. No, debt does not vanish if interest rates are negative, but lenders might!
I'm afraid you are still not seeing my logic. Obviously the debt is NOT LITERALLY extinct or written off from the goverment balance sheets. The loan agreement is entered when there was debt sold and bought from the auctions at agreed price until agreed deadline. My idea is to focus on HOW the borrower is paying back the loan. I'm not talking about the lender at all at this point (Anyone lending at 0 or negative nominal rates is retarded, nothing to discuss here) I introduced an environment of ongoing 0 to negative rates for the future (as we've already seen the past years for some countries and as we are witnessing lower and lower global rates in general). Now, the lower the rates the easier it is for the borrower to meet it's obligations, isn't it ? Up to a point when rates are zero and the borrowers ability to meet it's obligations are the strongest. I'm already PRICING the fact that old principal is paid back with new debt because noone can afford to pay down the principal. Because that is the ongoing practice of how goverments operate, is that correct ? Well, if it isn't then gov debt couldn't be growing, but it is. Yes, your debt exits, ofc, but SERVICING difficulty is non-existent with 0 rates (Even here, i want you to understand that i know very well that NOT ALL debt is suddenly at 0 rates, only the new auctioned ones, but as this enivironment prolongs...). The fact that the opposite of this is the actual reality for years now was the main reason i started even talking about this. You'd be very fcked up, when you were to put money behind this rationale. Buying power borrowed vs lent logic now exists only dinosaur age economic textbooks. This knowledge is already priced in by the markets. This "next generation" economic environment goes to show you that all the old school economic text books can be thrown to fire place. At least it'll give you warm. That's real value. I have a question for you: Do you think it's possible to pay down the debt (let's use the US as an example) and what does it mean for the economy ?
12. Ponzis at their highest level. https://www.cnbc.com/2020/02/11/ponzi-schemes-hit-the-highest-level-in-10-years.html
That's not necessarily true. Again, pay attention to the equation for real yield and make sure you get your algebraic signs right. As Yogi said, "Predictions are hard, especially about the future" The fuss over negative interest rates has been way over blown by the way, and especially by people, such as yourself, who don't understand the difference between nominal rates and real rates.
Pay it down, yes. Pay it off, no. But why would you do that???? You'd throw the economy into a disastrous depression. That is EVERYTHING young man. Always has been, always will be! Please go away and stop this incessant nonsense.
This thread was posted one day before the ATH for the SPX at 3393. Timing is everything. We are 270 points below that now....
If you don't mind Pekelo, I'll add a little. 1. last Dow transport high was Sept. 2018 2.Global Debt to GDP 4th quarter 2019 was 322% 3.Global oil and gas glut 4.Short capitulation 5. Retail back in big. FANG, TSLA, BABA, 6. Manufacturing and ISM in contraction 7.Number of stocks that have parabolic charts 8. Number of companies that have a losing money model 9. Interest rate cuts and Treasuries charging ahead 10.Sub prime auto and credit card delinquencies at all time highs, more than 2009 11.Countries on the verge of recession, UK, Italy, China, Hong Kong(not a country),and those highly stressed,Turkey, Argentina, Iran, Mexico, and Brazil 12. Price to sales record. The percentage of S&P 500 sectors with an aggregate Enterprise Value to Sales above the 90th historical percentile. More than double what it was in the dot.com bubble. 13.After several years of global unrest, world markets went on to enjoy a time of wealth and prosperity, ten years and 10 months. Nope,,, not talking about the last 10yrs. and 10 months, I'm referring to the end of WW1, Nov. 11, 1918 to Sept. 4, 1929, 10yrs. and 10 months. Coincidence, we'll just have to wait and see. Not a perma bull or a perma bear, I just trade the market. The above info is what made me short the S&P 500 via the SPXU and I do have a target of 2970ish.