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Bizzaro World Becomes Normality: Germany Issues Five Year Negative Bond

 -- Published: Friday, 13 March 2015 | Print  | Disqus 

By Nathan McDonald

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?

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