14 June 2019

Your Money for Nothing - When Capital is Free

File under: things that mostly just fascinate me but really do affect everyone:
"$20 trillion of the $55 trillion in global sovereign bonds currently yield zero percent or less." From here.

Why does it fascinate me? In our new reality, money is free for countries.
Why does this affect you? It means that we're under-investing in infrastructure, education and most importantly of all, research. All of that can essentially be conducted by nation-states with zero percent loans. A return of even 1% on that investment covers the cost of capital. A lot of what passes for returns to capital now are actually winning bets on entrepreneurship. 

We're going to look back on the first decades of the 21st century as a lost opportunity for massive investments in projects - public sector and private sector (in the form of startups and corporate initiatives) - given that capital was free and we had more university graduates than we were fully employing.

Future generations' assessment of us will be that what we lacked in imagination we more than made up for in risk-aversion. And instead of funding grand projects, we used this free capital to bid up the price of art, stocks and other pre-existing assets.

No comments: