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Author Topic: Why do people keep buying bonds when the government is in debt?  (Read 1461 times)
sardokan
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June 20, 2015, 08:37:57 AM
 #21

Isn't it a greater risk to buy bonds when the government is in debt?

That depends on the nation, which is issuing the bonds. Some of the countries issue bonds which are having a very low risk of default, such as the United States. But these bonds usually have very low interest payments, like 3% per year. On the other hand, there are bonds issued by "risky" nations, which are having higher interest rates.

It's a ponzi

Default risk is 100%, it's just a matter of time.

There is no chance USA will pay his debts  Grin

they don't have to, as long as they keep creating toilet paper out of thin air, this how it works out there, and how it always worked, they do not want to change their perfectly scam strategy, until it keeps working good

I would say "as long as they have best ICBM and army"
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October 02, 2015, 11:55:44 AM
Last edit: October 24, 2015, 11:47:26 AM by n2004al
 #22

Isn't it a greater risk to buy bonds when the government is in debt?

The answer is no. The governments bonds are money borrowed from the State and as such are secure. So you have the security that you will have back your money and its interest (normally) the day in which they are matured. The word "normally" is connected with situations which are extraordinary and have great impact in the life of one country (for example an war). In that cases the bonds cannot be given but not denied. Never. Even in its more difficult days normally every government give the money of bonds and their interests to the owners. Not only that but offer others (if it is in difficulty) will higher interest. Even, the main thing that the people invest in bond is not the interest but the security of the money given to buy the bonds. Is the given of the money to the State which never deny its debt to its owners. For more about government bonds you can learn here: https://en.wikipedia.org/wiki/Government_bond
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October 24, 2015, 11:46:12 AM
 #23

Because people are irrational in economic thinking. They buy cars while in debt for luxury. How can someone have luxury in debt position?
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October 24, 2015, 06:12:35 PM
 #24

Isn't it a greater risk to buy bonds when the government is in debt?

This is true of any financial asset, including stocks and real estate.

We know stocks and housing are artificially propped up by low interest rates dictated by central banks -- so they are over-valued, similar to government bonds that are over-valued when you look at the sheer amount of debt the government owes.  (Bonds are propped up by public institutions in multiple ways, one of which is central bank buying with freshly printed money.)  But people buy all these assets all the time.

Ultimately, buying these assets is a bet that the propping-up will succeed, at least until we sell the propped up asset.

The essence of the modern world system is that savers are robbed by having to gamble on whether financial asset manipulation by the elites will succeed during the time horizon under consideration.  The elites are much better positioned to win in this game, and one of the reasons is that they have much more detailed information about the chances of these bets.
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