Wednesday, March 19, 2008

What a Treasury Bill really gets you

Interest rates in the United States have recently fallen to around zero after you adjust for inflation. Naturally you might wonder why people are willing to invest at such low rates. One good reason is that there's not many other places for the money to go.

Try to think of a list on countries you are exactly sure will be around in 30 years. It's pretty short. US, Japan, Western Europe, Canada (maybe). Africa is a no, so it the Middle East, and mainland Asia. Korea maybe. Latin America is a no.

This is why the United States doesn't have much of a problem selling their bonds at low return. It is about as close to risk free as you can get.

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