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Napanee, Ontario | .......Except Treasuries are an investment - if you loan your money to the government for a period of time it is indeed an investment.
Lower risk class than equities sure, and but still an investment. The government uses the money *supposedly lol* to promote real economic returns in the state. I choose treasuries just as a case of comparison.
If someone with a lot of cash converts it to a 10 year bond, that cash is gone for 10 years. That's an investment, not cash. They can sell their investment, sure, and convert it back to cash, but there is a risk they might not get the same money for it depending on what interest rates have done between purchase and sale date. Because of that risk, it cannot = cash.
With regards to your second comment.... I'm going to try to come at this from a different angle.
"is the fear that there will be no income going to frighten them into hunkering down" ---- So hunkering down into what?
"investments can go up when there is no real alternative".............. ;)) ?
Yes, you might get zero income (ROI) in an investment. But if your alternative is negative income... (hunkering down in cash) what do you do? Continue to buy the zero and declining income asset until it's no better than the negative income one...? I think that's what I'd do... seems to be what's currently happening? I dunno. I think When the spread between investment real returns and cash real returns narrows to the point of no incentive to invest is where I see your argument having merit? Because I do see what you are saying... and the spread IS narrowing.
Edited by OldMcdonald 11/24/2014 14:43
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Negative interest rates coming?
