| Note: This is Part 3 in a 6 part series called "The Retirement Conspiracy." Go to www.RetirementConspiracy.com to read the full series. Part3: BOND YIELDS
In Part 1 of this series, I explained how inflation is actually a mechanism to incentivize you NOT to save money and to spend it instead.
In Part 2 I showed you how the Fed has price-fixed interest rates to essentially make saving money in a bank completely fruitless (all in an effort to influence your behavior and keep you spending, rather than saving).
Today, I'm going to keep it short by showing you a simple chart and doing some "Napkin Math."
You see, when it comes to Bond Yields the expectation is that they will "save you" from inflation.
Because bond rates are simply "supposed to" rise when inflation does.
So in the event of runaway inflation and less than stellar stock returns (as you'll see in Part 4 of this series, most stocks do NOT like high inflationary environments) Government Bonds are supposed to be the fixed-income life raft.
That one place you can have some of your money that will "offset" the bad times.
There's just one problem…
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Rates have done nothing but fall.
Of course, still the question remains, "Won't they just increase rates if things get too bad? Won't they have to?"
The Fed Cannot Increase Interest Rates…EVER
And the reason is due to some very simple math.
After Biden's $1.9 trillion stimulus (with plenty more to come by the way – this is never going to stop) the US Government will have around $30 trillion in debt by the time it's all said and done.
Before the Coronavirus Pandemic – back in 2019 – the US Government was taking in $3 trillion of revenue during one of the best economies of the last 20 years.
And they were spending $4 trillion.
That means they were running a $1 trillion deficit.
Now, the interest on that $4 trillion of spending a year was about $400 billion.
So that comes out to only about 10% of their total spending.
But if you take the $30 trillion of debt now and you increase rates up to even 5% for the 10 year or 30 year bonds (which used to be a fairly reasonable rate during hard times – see the chart above for proof of that)…
…then that would be $1.5 TRILLION of interest expenses.
That would put interest on the debt at 50% of revenues!
In other words – it would make the United States government insolvent.
Rather Than Raise Rates, Not Only Are They Likely To Artificially Keep Rates Low, They May Just Make Them Go Negative
The US is really one of the very few nations left in the world who actually have any kind of positive yield on their bonds.
Although when you factor in inflation, the real yield on US 10 Year Treasuries is negative.
Yet, countries like Germany are at 0% or below 0%.
Same thing with Japan.
Even China is selling negative-yield debt – their five year bond was priced with a yield of -0.152%.
And you should be grateful!
…or so the thinking goes.
You see, there is literally an expectation that you should feel better loaning your money to a Government for a guaranteed LOSS on that investment (on top of inflation), rather than keep your money in the markets because you might lose even MORE there.
In other words – a Bond is a known loss (a guaranteed loss).
The stock market is an unknown loss (so you might lose MORE than the bond).
If you're starting to think this all sounds insane – you ain't seen nothin' yet.
To recap…
- Saving cash is useless
- Putting your cash in the bank is useless
- Investing in bonds are useless
Again…why?
So you spend, spend, spend.
What else are you supposed to do?
When they close every door and destroy every instrument you could use to save for your future….shouldn't you just give up and stop even thinking about the future?
No wonder, according to G&H Financial Group 1 out of 5 millennials believe they will never retire.
In fact, they're even starting to ask, "Why should I ever retire?"
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An entire generation is beginning to buy into the idea that they're just going to work forever and spend money and "live it up."
As the saying goes – YOLO (You Only Live Once).
The behavioral conditioning caused by this Retirement Conspiracy is doing its job in fine, calculated order.
Just make money…and spend it.
Then make some more…and spend it.
That's your job as cattle for the Keynesian economy.
And who can blame can blame millenials for capitulating, when even half of Americans with incomes over $100,000 fear they'll never retire?
That's what was revealed in a recent survey of US adults aged 40 to 65 with $100,000+ incomes.
But there's hope….
There's A Way You Can Beat Inflation, Generate More Interest Than Any Savings Account, And Generate More Yield Than Any Bond
By now you're probably wondering what the solution to this Retirement Conspiracy is.
The answer is – you have to take control of your financial destiny.
If they're going to try to block off every avenue and instrument that would allow you to save your money and live a comfortable retirement you must create your OWN retirement income.
This is what I've been doing for over 25 years, and when you go here you can find out how to do it too.
Now, some of you may be wondering, "What about the stock market? Isn't that where I can put my retirement savings? And can't I live on stock dividends?"
Don't worry – in the next two parts of this series I'll be getting into these strategies as well.
Trade Wisely,
Jon Lewis
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