German bank that almost failed now being paid to borrow money
The flight departs Sydney, Australia at 12:50pm and arrives to Santiago, Chile the same day at 11:20am. In other words, the plane lands 90 minutes before it departs.
When I landed yesterday, the captain came on the P.A. and said, “Ladies and Gentlemen, I have good news; if you enjoyed Wednesday March 9th, it’s still Wednesday March 9th!”
It really does feel like going back in time.
This feeling was only reinforced when I whipped out my phone and saw that German bank Berlin Hyp had just issued 500 million euros worth of debt… at negative interest.
I wondered if I really did go through a time warp, because this is exactly the same madness we saw ten years ago during the housing bubble and the subsequent financial crisis.
To explain the deal, Berlin Hyp issued bonds that yield negative 0.162% and pay no coupon.
This means that if you buy €1,000 worth of bonds, you will receive €998.38 when they mature in three years.
Granted this is a fairly small loss, but it is still a loss. And a guaranteed one.
This is supposed to be an investment… an investment, by-the-way, with a bank that almost went under in the last financial crisis.
It took a €500 billion bail-out by the German government to save its banking system.
Eight years later, people are buying this “investment” that guarantees that they will lose money.
The bank is now effectively being paid to borrow money.
We saw the consequences of this back in 2008.
During the housing bubble, banking lending standards got completely out of control to the point that they were paying people to borrow money.
At the height of the housing bubble, you could not only get a no-money down loan, but many banks would actually finance 105% of the home’s purchase price.
…click on the above link to read the rest of the article…
