As of yesterday the negative discount rate on T Bills went to .o1%, that is negative as in "I will pay you to hold onto my money for me". Let's put this in everyday terms. Imagine our hapless millionaire looking for a place other than under his mattress to stow a million. He goes to Uncle Sam and says Hey Sam here's a million to invest as you see fit or to pay down your debt or build a new plane or whatever please hold onto it for three months and pay me in interest what you think is fair. Three months later said millionaire comes back to Sam and says "Hi" I'd like my million back plus whatever you think is fair in interest and Sam says actually you owe me $25.56 for my trouble holding on to and investing your million, please remit. So yes the wealthy are willing to actually lose money to at least keep it in a safe place. It is safe there because even should Uncle Sam go on a complete Romanesque orgy like drunken spending binge all he has to do is print more money and he's good to go. Life's good.
In conclusion this does beg the question. Why are the wealthy willing to put their money where it does nothing for them, in fact actually realizing a slight negative return? As a general rule those that succeed and thrive in capitalism have not done so by being stupid or making ill advised business decisions. Why don't they put it in the market? Or in separate interest bearing bank accounts? Money Market? Market based Muny's?
We're not talking about a few crazy kids just looking to park a million dad left them or something like that. The Treasury sold $32 Billion worth of these negative discount bills yesterday, Tuesday. Why did 32,000 millions get put in an "investment" position where they would earn their owners NOTHING?
Things that make you say "hmmmm...."
9 comments:
Doug, not as intelligent as you my dearest, (hopefully a little prettier) hee hee. Would you please explain that in blonde terms? Or did I "get" it when I read you, that the rich aren't affected by this economy crap. They can and will always be able to buy their kids the Christmas presents they want. My children get it. When their best friends have to move because of foreclosure and they didn't understand it at first...now they get it. It's an everyday thing.my boys have now become "economy" savvy. When I ask them what they want for Christmas...They say It's okay,whatever. They worry more than any child should. as do most of our American children.
Patsy,
you are lot prettier actually.
I'm not sure what it means except there are people out there with lot's of money that don't trust banks. And the rich are affected by this economy, only not to the extent like the middle class and working poor.
The Government has spent upwards of a trillion dollars to bail out/stabilize/whatever the financial & credit markets. A fair percentage of this is gone and no one seems to know what if any good it has done for us. None of this bailout money will benefit those that are in danger of losing their homes through foreclosure. There are now firm estimates that by the end of 2010 there will have been or will be 16% of American homes in foreclosure, or roughly one out of every six. This will provide an excellent buying opportunity for those with money, like say for example those that have received billions in free and unconditional taxpayer dollars.
So...AIG, Morgan Stanley, BB&T and all the rest will be taking money from you and me, using said money to buy foreclosed properties at great losses to the foreclosed, and then repackaging and reselling the properties at a later time at considerable profit to them and at no benefit to the taxpayer.
To be brief, this so called bailout is the ultimate scam and fleecing of the american taxpayer. If you are looking for relief from our favorite uncle don't hold your breath. Uncle Sam has been and continues to be a willing participant in this rigged game.
Be prepared to take it in the shorts.
Don't they get some sort of tax break on the bonds. Do they pay tax on the amount only after they cash them?
Depends really. A huge volume of T-Bills are bought & then traded amongst various private & public funds. You wouldn't have much of a tax liability anyway on a note that is at best not making anything.
The whole point is these people were not buying these 3 month T-Bills for the tax advantages. They were buying them as they see them as the last safe haven for their cash. That is to say there is much money out there right now with the inclination that many banks and their coincidental assets are no longer safe.
I got a big fat 'D' in 'rock-head economics 101' in college.
But I am willing to sell anyone a bottle of air for a 'buck two fifty'! ;)
be careful Doug, startin to sound like robert.
post script...I think my last comment may have sounded shallow, considering all the babes in this world who have nothing. My boys help.
Patsy,
worse things in the world than to sound like your brother. Believe me, I hear it all the time.
Shoot me an e-mail sometime if you like.
Doug, lost stuff, when I lost computer...got PC,lost your email. mine is Patsee007@comcast.net
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