Entries Tagged 'Government' ↓

Negative Interest Rate Government Bonds

Right now there’s a lot of talk about negative interest rate government bonds. Let’s understand what this means for the US and the rest of the world. Are negative interest rate bonds a sign of recession?

Negative interest rate bonds

Most nations and some regions in the world have a central bank. Some central banks are run by the government. Others are privately owned. These central banks try to influence their national economy for the better.

Some of these central banks have tried quantitative easing to stimulate national economic growth. QE means that governments have been paying to buy back their own bonds. This hasn’t worked out well.

Now governments are going the other way. They are selling a new kind of government bond–long term government bonds that pay a negative rate of return upon expiration.

In other words, negative interest bonds are bonds that a government expects to make a profit from at the end of the bond’s lifetime.

Does this sound incredible to you? It is. Who would bet on a horse they knew would lose? Continue reading →

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Goldman’s Greek and Malaysian Deals

If you haven’t read Robert Reich’s explanation in the July issue of The Nation of how Goldman Sachs engineered Greece’s downfall you really ought to take a look. And please note this isn’t the only country in the world in which Goldman Sachs has become a persona non grata.

Reich’s allegations regarding Greece

Goldman Sachs came to the rescue, arranging a secret loan of 2.8 billion euros for Greece, disguised as an off-the-books “cross-currency swap”—a complicated transaction in which Greece’s foreign-currency debt was converted into a domestic-currency obligation using a fictitious market exchange rate.

As a result, about 2 percent of Greece’s debt magically disappeared from its national accounts.

The consequences were severe:

By 2005, Greece owed almost double what it had put into the deal, pushing its off-the-books debt from 2.8 billion euros to 5.1 billion.

Continue reading →

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Greece, The IMF and Ukraine

Are you wondering why the IMF is standing by Ukraine against Ukraine’s creditors, while the IMF is refusing to extend even a smidgeon of an olive branch to Greece?

Creditors have loaned Ukraine $70 billion dollars. To receive payment of $40 billion from the IMF,  the IMF required Ukraine to convince its creditors to agree with a restructuring plan that would enable Ukraine to raise $15.3 billion out of the $70 billion it owes its creditors.

A committee of bond creditors came up with such a plan for settling with Ukraine. In response Ukraine: Continue reading →

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