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.
