Loading ...For all those that used to crow about the Fed not printing the money to pay the interest with on Bonds in a fractional reserve currency scheme and thereby causing a boom & bust by those left without enough income to pay interest in a zero sum economy .Well now that bonds yield just about zero ,which makes almost all bonds zero coupon bonds .The Fed is printing enough money to pay the interest at 100 % ,but nothing for the Bond itself which has become a trap that yields nothing and must be held to maturity to get the full promised payment .As inflation rises their choice is to sell at a discout or hold to maturity with inflation eating their purchasing power away and paying taxes on imputed income ..So the bond holders get a royal screwing ..they become saleable only at a discount and to make matters worse a zero coupon bond holder must pay taxes on imputed interest (phantom income).For 50 years the Fed didnt print the money to pay interest with ..now thats ALL they do is print money to pay interest , 100 % of it..reducing their cost of DEBT to ZERO and leaving Bond Holders out to dry…
At the current rate it might take another 50 years to print away the accumulated interest,so dont expect any return on Bonds until the Guvvy is OUT of DEBT ….which will NEVER happin .So their choice seems to be continue printing the interest at about 3 % or accept much higher inflation in a stagnate economy which will lead to a new bust ….ta da
Famous Bond Guru Franz Pick used to say “A Bond is a certificate of guaranteed confiscation” …