Who wants to sign this contract with me? You give me $1000 today, and then I'll give you back $990 in three years. There are $15 trillion dollars worth of contracts like this - Right, Now.
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Assuming 3% inflation it means that if you pay $1,000 today and get back $990 it will only be able to buy $904 equivalent of goods and services in 3 years. Global markets are in for a world of pain if people are willing to cop $100 loss b/c this feels like their best option!
They are paying large premiums (assured losses) to avoid risk. Happens all the time in third world countries but now it's finance in general.
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Also, there are often legal requirements for pensions and central banks to hold certain classes of "low risk" bonds, especially sovereign bonds. Also force of habit. Tons of distortion in financial markets from these obsolete and bubble-chasing practices.
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AND...when those "low risk" bonds get re-rated to a lower classification, pension funds in the U.S. <b>MUST<b> liquidate the position according to new laws that were past since 2008. Nothing spells illiquidity like forced selling.
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Don't worry, everybody knows and can only know vastly less than the actual complexity of the financial world. Only the pseudoscientists pretend otherwise.
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Nothing like the calm of a master to soothe the soldiers soul.
End of conversation
New conversation -
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What risk are they avoiding that holding cash in multiple accounts (or vaults) wouldn't be much better option? I understand the requirement argument, I don't understand the avoiding risk vs cash argument.
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Maybe it’s just not feasible to do this physical storage for these big funds managing tens/hundreds of billions of dollars. I think all
$FRN in circulation is <$10T, and other ppl like holding it too. Would be curious if any big funds have attempted it. -
This is my best guess too.
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Guess they’ll just have to buy/custody bitcoin ¯\_(ツ)_/¯
End of conversation
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