Over the weekend, just something I noticed.
From the chart, you can say since the end of 2021...with bond rates increasing....old bonds were sitting there without any interest from the banks to dump or finding consumers to purchase.
Desperation is a word I'd use.
Desperation is a word I'd use.
What happens if people start walking into banks to remove their cash or just get it in bills to place in a safe deposit box? A collapse leading to bank closures.
What the Fed would do, or the President? I would assume they'd invent 1929-like tactics....a 7-day closure and on reopening, you'd be limited to no more than $1,000 a week being removed. On paper, your money might exist to the full extent possible, but only with the gov't printing out a trillion-odd dollars to suggest to your satisfaction.
I would also suggest a lot of people just aren't that business-savvy and would believe for 30 days that the temp-closure and weekly limit was a temp thing. I'm of the mind it could be gov't policy for the remainder of the Biden term.
But here's the thing.....is the $600-billion unrealized losses the limit? I would suggest that they'd have to wipe out the losses on paper....to regain your trust. How'd you make the unrealized losses disappear? A curious problem, I admit.
Just something to ponder.
There is only one way to wipe out unrealized losses on bonds. Wait until the bond matures, then cash it in.
ReplyDeleteWell....you could go and sell the bond to some idiot, with him paying you less value, and him assuming some debt.
ReplyDeleteTo be honest, most people I know...would only pay less money on the value, in order to get a profit (say 99.9-percent of people).
Now, the gov't might crank up a method, where they paid some value, and just assumed the loss for you. But it'd be funny...you invented the bond to make money, sold them, then bought them back for more money, and assumed a loss in the end. It's like having $100, selling it for $105, then buying it back for $120...assuming $15 of loss.