|
|
|
|
|
|
by RockIslandLine
2128 days ago
|
|
|
"Whether it is bonds, or some other instrument, they all pay interest. That debt exists, is owed, and yet you're saying "Just don't pay that interest"?" I'm saying it's wrong to create federal bonds with an interest rate that is far different from zero. The rules are different between currency issuers (nations with a fiat currency) and currency users (citizens, municipalities, provinces, nations on the gold standard). Currency issuers have a unique ability to guarantee that you will hold an exact amount of the currency on a given date. No currency user can make that guarantee. Because currency issuers can guarantee repayment on debt in their own currency, the repayment risk on the debt is strictly and exactly zero. Thus the interest rate on that debt should always be very close to zero if not exactly zero. The fact that Canadian government debt pays high interest rates merely tells you that the government did things wrong in the past. |
|
|
Two things.
First? Interest also represents the reduction in value of the currency unit, over a period of time.
I keep a few thousand hidden around the house. In case of need. Yet, each year... even with 4%, 2%, whatever inflation, that $3000 is worth less. It has less value.
Interest exists for three reasons. Risk, as you talk about above, but also as profit for being nice enough to lend capital, and lastly to combat inflation.
Why would people park their money, and lose both value in that money due to inflationary pressures, AND, make 0% on that capital when they could literally park it many other places and make even double digits?
It seems odd to me, that you completely ignore the for-profit motive in money lending, and the inflation issues in lending. As if they simply do not exist. Even in down markets, historical a wise lender (like a massive bank, which tends to lend to a federal level goverment) makes more by parking that capital elsewhere.
In terms of the Canadian Government paying 'high interest rates', I merely stated that it pays 'market interest rates'.