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A comment on Germany for First Time Sells 30-Year Bonds Offering Negative Yields. Parent comment

Re:Germany for First Time Sells 30-Year Bonds Offering Negat... by rchaud on Wednesday August 21, 2019 @02:15PM (#20759861)
Look at the S&P 500 index from early 2008 to say 2012. Governments will enact policies to prop up the stock and bond markets, as they always have.

Our entire civilization is held up on the promise that financial market indices go up over time, except for temporary recessionary periods. We just accept that retirees cashing out at the wrong time will be victims of 'collateral damage' during these 'market corrections'.

Everything from job growth, to the pension funds that you contribute to, to the municipal bonds governments issue to fund projects, rests on this one core assumption.

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Re:Germany for First Time Sells 30-Year Bonds Offering Negat... by f00zz on Wednesday August 21, 2019 @02:20PM (#20759921)
People who bought the Nikkei index in the early 1990s are still waiting for the correction to end...
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Re:Germany for First Time Sells 30-Year Bonds Offering Negat... by mywittyname on Wednesday August 21, 2019 @02:30PM (#20760042)
https://dqydj.com/nikkei-return-calculator-dividend-reinvest...

After dividends, you broke even after inflation (-0.096% return) if you dumped your life savings into the Nikkei in Jan 1990 and never invested another dime.

But if you kept investing incrementally over the years, like most people do, then annual returns went to 2.5% after inflation in 1995-2000, to 6.5% in 2005 and 9.4% in 2010.

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Re:Germany for First Time Sells 30-Year Bonds Offering Negat... by rchaud on Wednesday August 21, 2019 @02:38PM (#20760152)
Good point. The Japan case is a weird one. There's a Paul Krugman essay from the '90s that argues it's partially due to a historically high savings rate among Japanese consumers[0]. A good chunk of their boom was export-driven after all.

Loosening monetary policy to fight deflationary pressure in the '90s also didn't seem to work because interest rates were already near zero. I think the US is different because the benchmark Fed rate is 2.25% now after many years of near-zero rates. So there's room to cut rates if needed.

[0]: http://web.mit.edu/krugman/www/nikkei.html

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Re:Germany for First Time Sells 30-Year Bonds Offering Negat... by f00zz on Wednesday August 21, 2019 @03:20PM (#20760614)
Interestingly, it could also be argued that the breakneck economic growth that some Asian countries went through (in the case of Japan, at least until the 1990s) can be partially attributed to their high savings rate. [0]

[0]: https://en.wikipedia.org/wiki/Harrod%E2%80%93Domar_model

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