[onlyrealcuzzo]

In a non-funny-money-world, government bonds would yield more than expected inflation.

No one would ever give the government money expecting to lose money.

Only in a world where you can always count on the government to lower interest rates ad-infinitum to keep itself solvent which pushes up the value of your bonds to someone who's willing to pay more money to lose the same amount of money later (a greater fool - although, are you a fool if you've been able to count on this like clockwork for the last 30 years?).

[kgwgk]

> In a non-funny-money-world, government bonds would yield more than expected inflation. > No one would ever give the government money expecting to lose money.

What would they do? Is there a dominating (stochastically) alternative?

[Dylan16807]

I don't follow your argument here.

How about a hypothetical?

Let's say government bonds pay 3%, they have done so for decades, and we're confident they will keep doing so for decades.

So right off the bat, no lowering of interest rates ad-infinitum.

Let's also say inflation is 4%.

Everyone wants to beat inflation. But you need to find an investment opportunity for that. And the higher an investment yields, the riskier it is.

If you can't find a good investment, what's plan B? Surely it's not putting your money in a vault and losing 4% a year. Isn't plan B buying the government bonds and losing only 1% a year?

[onlyrealcuzzo]

AAA corporate bond yield has always been about ~1% above the treasury yield [1].

Almost nobody has bought government bonds for a long time besides pension funds (due to obligations), banks (due to regulations), foreign governments (due to ForEx necessity), the Fed, and a pretty small amount (~8%) held in 401ks (overwhelmingly by older folks) [2].

Rich people certainly aren't buying Treasuries to protect their wealth - unless it's someone like DoubleLine betting on interest rates only going down and the forced greater fool (pension funds).

401k people are only buying treasuries because of the "age old wisdom" - not because it makes sense unless you think like DoubleLine that treasury yields - long term - are only going down.

[1] https://fred.stlouisfed.org/series/AAA10Y

[2] https://www.thebalancemoney.com/who-owns-the-u-s-national-de...

[roflyear]

This is just misinformation, I have worked with investment firms and family offices that regularly buy government securities.

[onlyrealcuzzo]

The vast majority of HNI wealth is not in treasuries. Some of them have astonishing amounts of money. They own everything under the Sun - obviously some treasuries. There's a lot of rich people - some of them at times are owning a lot of treasuries.

The reality is - a small percentage of treasuries are owned by individuals (including - and mostly - 401ks) - I linked to the data above.

Anecdotal evidence that you helped some people buy treasuries does not dispute that.

Something like ~5% of treasuries are not owned by The Fed, Foreign Governments, Pensions, 401ks, and Banks.

The vast majority of that is owned by bond traders. You're talking about maybe $600B owned by a group of people that has >$30T in wealth. That is basically nothing.

[roflyear]

That is correct, probably just a few percent. But the language here is making it sound like they are not purchased at all by individuals or family offices, and that is not true.

[roflyear]

This isn't true.

If you had a bunch of gold, for example, you'd have to pay for security to... secure it.

People are willing to "pay a premium" to store money somewhere risk-free.