Five Hundred Million Dollar Negative Yield Bond Issued

I have permission from Mr. Welsh to repost anything he writes after waiting at least a day or two from his original posting.

by Ian Welsh, Nov. 17, 2017

No, central banks aren’t screwing the economy up with their purchases:

Veolia (Paris:VIE) has issued a 500 million 3-year EUR bond (maturity November 2020) with a negative yield of -0.026 %, which is a first for a BBB issuer.

To be clear, central banks didn’t buy those bonds, investors did. But central bank purchases of government debt are a large part of what is causing this issue.

The ECB (European Central Bank) has been buying SEVEN times the issuance of government bonds. Seven times. Seven times.

They are straight up financing governments (which, done right, could be a good thing, but isn’t in this context).

The problem in the world today is the same as it was 15 years ago, before the financial collapse: There is too much money chasing not enough returns. Because there isn’t enough real growth, that money moves into bubbles and fraud, and destroys companies through leveraged buyouts and so on, but it also means that, if there isn’t enough fraud or predation going on, it sits and stagnates and does nothing worthwhile.

What the developed world actually needs is stuff to invest in, high marginal tax rates (higher on capital gains than on earned income), distributive policies to the bulk of the population to create wide-spread demand, and moderate inflation of about five percent a year to get people to actually invest in new businesses, not in financial speculation.

The problem with this solution set is that if it doesn’t also include effective regulation, it can have to environmentally devastating effects; for instance, because solar is not fully online, the above solution set could lead to oil price spikes.

Those problems, however, are not why this isn’t being done. This isn’t being done because current leadership does not believe in high taxes, wide distribution, or regulation. They are neoliberals, and 40 years of neoliberal disasters cannot convince them to engage anything other than neoliberalism, because neoliberalism has made them and their friends very very rich.

But the game is coming to an end. They want to tax the middle class and poor people, sparing the rich but they are now starting to tax the rich through the back door of negative interest rates. Meanwhile, the poor and middle class, especially the young ones, are losing patience and are willing to go either straight-up socialist or straight-up fascist (the Polish 50K rally).

This is going to get a lot uglier before it gets better.

There will be three choices for countries: Fascism, left-wing populism, or dystopic surveillance/police states.

Choose.

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Comments

a negative yield of -0.026 %, which is a first for a BBB issuer.

BBB is the lowest level of investment grade bond. Anything lower is junk.

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24 users have voted.
dkmich's picture

It is all there is to hope for.

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16 users have voted.

*donate *follow us on Twitter *like us on Facebook *dump Google

k9disc's picture

Wow, quite a powerful idea there, Tony.

Not even joking, and it’s conventional wisdom enough to be sticky and effective framing.

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13 users have voted.

“Tactics without strategy is the noise before defeat.” ~ Sun Tzu

k9disc's picture

Wow, quite a powerful idea there, gj.

Not even joking, and it’s conventional wisdom enough to be sticky and effective framing.

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5 users have voted.

“Tactics without strategy is the noise before defeat.” ~ Sun Tzu

Wink's picture

"real growth" becuz multi-millionaires and billionaires - the 0.1% - are hording money rather than investing in things like solar energy that actually Do create decent paying jobs. Guess what, billionaires? When the middle class aren't upgrading their Lifestyle by home improvement or buying a better house or buying new toys, and the working poor haven't upgraded their Lifestyle or bought new toys in forever... well, there's zero money flowing thru your Economy. You assholes have hit rock bottom. You've stolen every nickel you could steal and the only money left to steal is in the Public Sector - schools and prisons. You've taken Reaganomics to a whole 'nuther level and that level has come back to bite you in the ass. Welcome to our world.

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27 users have voted.

the little things you can do often are more valuable than the giant things you can't! - @thanatokephaloides. All about building progressive media. (-1.9) On Twitter @winkradio.

riverlover's picture

@Wink I have an $11.00 bill for a yearly NY state dog licence. $1 to to NYS. This ia exploitative taxation, nickle and diming.

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Wink's picture

@riverlover
fan of dogs, and pretty much hate cats. And cat diaries /essays. Well, hate may be too strong a word, but don't like them, find them creepy. Once dated a woman who owned four cats. That didn't last long. I can tolerate dogs, but I'm no fan. No goldfish neither. Never really got the whole pet thing, even as a kid. You mean this beast lives in your house? Seriously? Prefer my animals deep fried or grilled.

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1 user has voted.

the little things you can do often are more valuable than the giant things you can't! - @thanatokephaloides. All about building progressive media. (-1.9) On Twitter @winkradio.

riverlover's picture

@Wink Wait--I had crab in shells. BU: before ulcer Dx. No limits on spicy so I will try again, more of those beasts in my freezer.

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3 users have voted.

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Wink's picture

@riverlover
re. spicy food. Or the otc Prilosec. I pop one Omeprazole each day and I'm good to go.

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2 users have voted.

the little things you can do often are more valuable than the giant things you can't! - @thanatokephaloides. All about building progressive media. (-1.9) On Twitter @winkradio.

travelerxxx's picture

@Wink

(Sorry, Tony, but I'm going to hijack your thread. But, I'll make this as short as I can.)

I was taking Prilosec every day for about 25 years. About eight years ago, I started having severe joint pain in my hands, knees, and other places. I made no connection to Prilosec use. I received word that a friend had broken his hip; he had other bones that had broken in the last few years. I found that his doctor told him the reason his bones were breaking was due to long-term use of Omeprazole drugs. He had been taking Omeprazole for about as long as I had been.

This got my attention and I started research. It wasn't easy because the manufacturers of Omeprazole-type drugs are hiding the side effects. There is a legal term, "Side Effects," and then there are side effects. The manufacturers swamp the internet with the legal "Side Effects," which were part of testing for acceptance with the FDA. Something else is happening.

Ralph Nader's organization has been fighting to require a "Black Box" warning on Omeprazole-type drugs - also known as PPI drugs (Proton Pump Inhibitors). They haven't got the "Black Box" warnings yet, but have gotten FDA to warn of usage of over-the-counter (OTC) PPI's that exceeds certain limits.

The limits are that you are not supposed to take OTC PPI drugs for longer than two weeks. You are then not use them again for four months. Here's what the FDA says:

Be aware that the OTC proton pump inhibitors should only be used as directed for 14 days for the treatment of frequent heartburn. If your heartburn continues, talk to your healthcare professional. No more than three 14-day treatment courses should be used in one year.

Probably the largest reason you're not hearing about the problems associated with PPI drugs is because there are billions of dollars at stake. PPI's are the second or third largest money maker in Pharma-world, depending on whose numbers you see.

Another point: Getting off PPI's is about like getting off heroin. It took me nearly two years and it was absolutely pure hell. There are actually support groups online for this. Luckily, my various joint pains started subsiding within about six weeks, although certain joints in my hands were likely permanently damaged.

There are some real reasons to be taking PPI's, but common indigestion isn't one of them.

(End of thread hijack. Sorry.)

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8 users have voted.
Deja's picture

@travelerxxx
Same goes for goddamn statins, whose side effects are loss of cognitive abilities . Dementia! And then the drug cos peddle more drugs for that!

It's all a scam!

P.S. I stopped getting heartburn/indigestion when my last kid in the house went vegetarian. I stopped buying and cooking meat when that happened about 3-4 years ago. I noticed that I'd get it when I ate meat when out. Just sayin'.

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6 users have voted.

"The gatekeepers must change."
Prince

Wink's picture

@Deja
I have a tear. No drugs no eat. But, yeah, they also tend to increase heart rate. Substantially. Is why I do treadmill. And round and round we go...

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the little things you can do often are more valuable than the giant things you can't! - @thanatokephaloides. All about building progressive media. (-1.9) On Twitter @winkradio.

travelerxxx's picture

@Wink

Wink, I understand there are very valid reasons to use PPI's. We have a family friend who lost her husband to esophageal cancer. Use of PPI's would have likely prevented it (not the cancer, per se, but rather the constant onslaught of acid that it is believed can precipitate it).

I know quite a few folks who take PPI's daily - many for years now - and almost none of them know of the serious problems associated with its usage. I've met only one person who understands that cessation of this drug will cause a massive increase in acid production that may extend for well over a year. In my case, it lasted for around two years.

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riverlover's picture

@travelerxxx and I know about the broken bones. Need a new DEXA scan for bone density. Rock and hard place may be touching. I can't afford more broken bones this year or next. A conversation with my PCP this week or next may help me out.

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5 users have voted.

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@Wink about dogs if you were blind.

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Wink's picture

@pro left
been very fortunate, blessed I haven't had any truly disabling conditions that have kept me out of the workforce - although I'm sure I could qualify for one of those disabled placards for vehicles. And I've lived most my life, coincidentally, in places where barely a dog was seen. In warm weather I walk in the local park here (designed by the same guy that designed Central Park in NYC, I $h!t you not), where plenty of people walk their dogs. I pet the ones that come close only becuz it seems rude not to, but otherwise would avoid them like the plague. I'm old these days, so I don't know that I need to go out very much. Maybe on the deck for a breath of fresh air, a trip to the grocery store. But I spend the majority of my time in front of this computer. A trip to the gym 3 times a week... I doubt at this point I would need a seeing eye dog, but 10 years ago maybe.

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the little things you can do often are more valuable than the giant things you can't! - @thanatokephaloides. All about building progressive media. (-1.9) On Twitter @winkradio.

Deja's picture

@pro left
I thought for about 3 decades (lol) about something I saw as a child. My mom and I were at the grocery store, and I saw a woman in dark sunglasses, with this dog inside the store. It had this stiff kind of leash thing I'd never seen. Of course, my mom smacked the shit out of my face for staring.

In the parking lot, I saw her open the back car door, put the dog back there, and then get in the driver side door, and drive away!

Omg! A blind lady is driving!

That bothered me for sooo long, until I finally figured out that she was just training the dog. Biggrin

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5 users have voted.

"The gatekeepers must change."
Prince

I just don't see it that way. Maybe that's because I'm old enough to remember the "wage/price spiral" that was so deadly in the 1970s. I also see the working class' suicidal belief in higher and higher incomes to keep up with inflation, a psychological fallacy that leads only to perpetual disappointment and things like alcoholism and domestic violence.
If inflation is necessary for capitalism then that is proof that capitalism is unsustainable. period.

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16 users have voted.

A PROUD Hillary hater since 1993

polkageist's picture

@doh1304 Thanks for writing this. I have to pour milk on my ulcer every time I hear we "need" a certain amount of inflation. The only acceptable rate of inflation is 0%.

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8 users have voted.

Greed is not a virtue.
Socialism: the radical idea of sharing.

@doh1304 @doh1304
1800 to the end of the century (approx) overall DEflation ran at about 1% or so, iirc. There were spikes in each direction but overall what cost a nickel at the start, cost a nickel at the end.
Central banks in private hands want the inflation. Society doesn't need it to function.

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9 users have voted.
Pluto's Republic's picture

@doh1304

….is an inflationary process, which is probably the reason why it was forbidden by the religions that emerged from the Middle East. It's probably the reason that Islamic banking is arguably the most stable in the world. When borrowed money produces something that increases economic the value of the nation, interest might not be so bad. But when you make money off of manipulating money, by extracting interest, that was viewed as a sin.

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riverlover's picture

I am clueless about taxation in the EU. Capitol losses can offset gains?

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Hey! my dear friends or soon-to-be's, JtC could use the donations to keep this site functioning for those of us who can still see the life preserver or flotsam in the water.

Pluto's Republic's picture

…the Greece meltdown and the IMF's passive-agressive crushing of Greece via the troika. This was particularly interesting because, around that time, the US had toppled Ukraine's government. Ukraine's legitimately elected President did not want to accept IMF loans. He knew the consequences of that. Hence, the democratically-elected government was swapped out for a NeoNazi puppet government. The discussions at Ian Welsh's website were enormously illuminating.

There is too much money chasing not enough returns. Because there isn’t enough real growth, that money moves into bubbles and fraud, and destroys companies through leveraged buyouts….

Now isn't that the truth. Amazingly, the numbers have always been a testament to that truth. But that didn't stop the banking aristocracy and Neoliberals from dragging the world through the taint and corruption of predatory capitalism, while endlessly thirsting for more of the same.

All in all, it appears to me we are living through the last of the Anglo Finance Era, which will never be known for its stability or sustainability. The world is quite sick of this violent, greedy empire.

But the game is coming to an end. ...the poor and middle class, especially the young ones, are losing patience and are willing to go either straight-up socialist or straight-up fascist (the Polish 50K rally).

There will be three choices for countries: Fascism, left-wing populism, or dystopic surveillance/police states.

If the world was at the mercy of the fate of a failing empire, that could be an atmosphere for the rise of these extremes. But there are many strong, independent systems working in the world to pull things together and make them work better. I suppose "it could get a lot uglier before it gets better" — but I think that is directly proportional to the thrashing of empire on the world stage in its death throes. The US could exit quietly, like the UK did when its empire came to an end.

In any case, that's up to the American people.

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13 users have voted.
snoopydawg's picture

@Pluto's Republic

about guillotines and one that said that there are telephone poles from California to DC that would be good for crucifying the rich. And wondering how rich people taste.

The comments from people on common dreams are going in this direction.
These are from this article and especially this picture of Louis Linton. She's the wife of U.S. Treasury Secretary Steve Mnuchin and for some reason she has been going with him to a lot of places he flies to. She went with him to Kentucky to see the eclipse when he said he went there for a business meeting that lasted just a few hours or less. And he too is using private jets for his travels.

After Money Sheet Photo Goes Viral, Steve Mnuchin Takes It as "Compliment That I Look Like a Villain"

Asked about the photo during an interview on Fox News Sunday, Mnuchin said he didn't have a problem with the photo going public but indicated he never assumed people who saw it would be offended or shocked.

You idiot! People wouldn't have a problem if it was just you in the photo, but there is no reason why your wife should be in it.
It's the look on her face that I have a problem with. And her gloves. The photographer explains why she's in this photo.

IMG_1471_0.JPG

comments

Louise Linton apparently auditioning for new role as Marie Antoinette.

To me it looks like a photo that screams, “I’m a clueless oligarch who deserves the Marie Antoinette memorial trip to the guillotine!”. Viva la Revolucion!

My kingdom for a guillotine!

Could there be a better depiction of a psychopathic pair than these two assholes?

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15 users have voted.

a longtime oligarch eugenics plan is already well underway

earth is the insane asylum for the universe

@snoopydawg we little people eat Brioche.

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Tony Wikrent's picture

@Pluto's Republic I generally agree with you, but must take strong exception to the idea that the British empire came to an end. Both the Panama Papers and the more recent Paradise Papers provide details on the world-wide system of tax dodges and dirty money havens, and the least remarked fact is that the jurisdictions involved are all, except a few, former British colonies, and most are still part of the British Commonwealth.

Even before the Panama Papers and the Paradise Papers were released, it was clear to those willing to look that the British empire never really ended:
Perpetual Decline or Persistent Dominance? Uncovering Anglo-America's True Structural Power in Global Finance

Another great reference on the actual structure of power in the world economy is the 2011 computer model built by the Swiss Federal Institute of Technology which shows that Barclays PLC is the most connected and powerful of the multinational corporations in control of the world economy: Revealed – the capitalist network that runs the world, 19 October 2011.

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- Tony Wikrent
Nation Builder Books(nbbooks)
Mebane, NC 27302
2nbbooks@gmail.com

Pluto's Republic's picture

@Tony Wikrent

It actually ties together many of the loose ends and suspected connections when one understands the US as a proxy for the true empire. It explains the compelling influence that leaders like Blair and Thatcher had with the American colonists, so to speak. The fact that the British maintained their currency while appearing to tightly integrate into the European Union speaks to your point, as well.

That both nations were completely undone, historically, by populists overwhelming the polls in 2016 is statistically telling. The Brexit and Trump transformation suggest parallel disruptions that will leave both nations profoundly changed.

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Pluto's Republic's picture

@Tony Wikrent

…which both suggest (to me) that an organizing "structure" can have a separate destiny from that which it organizes — deliberate or otherwise. As science begins to physically map big data and complex systems, a Heisenberg-like awareness (or knowing) creeps into the big picture — and it is fraught with possibility. The scope of such analysis really stands out in "Revealed – the capitalist network that runs the world"::

From Orbis 2007, a database listing 37 million companies and investors worldwide, they pulled out all 43,060 TNCs [Transnational Corporations] and the share-ownerships linking them. Then they constructed a model of which companies controlled others through shareholding networks, coupled with each company’s operating revenues, to map the structure of economic power.

The work revealed a core of 1318 companies with interlocking ownerships. Each of the 1318 had ties to two or more other companies, and on average they were connected to 20. What’s more, although they represented 20 per cent of global operating revenues, the 1318 appeared to collectively own through their shares the majority of the world’s large blue chip and manufacturing firms – the “real” economy – representing a further 60 per cent of global revenues.

When the team further untangled the web of ownership, it found much of it tracked back to a “super-entity” of 147 even more tightly knit companies – all of their ownership was held by other members of the super-entity – that controlled 40 per cent of the total wealth in the network. “In effect, less than 1 per cent of the companies were able to control 40 per cent of the entire network.”



That puts fact to long held speculations about high-level structures that wield control over the real economy — but that is only where it begins to get interesting. Some suggest this control structure may form spontaneously rather than by design. The structure itself may manifest behaviors that lead to certain outcomes. Most importantly, it suggests that third parties such as ourselves, can insert protections that block the foibles of the human components, which lead to economic disasters like those of 2008. Essentially, this comes down to insanely clever regulations, including a tax on "connections" between members of a group that would mitigate or limit the possibility of runaway collusions.

I can't help but note that the madness surrounding the 2016 election seems to be made of this stuff. While hapless analysts yelp over "possibilities of collusion," they are lost in a data structure that is too big for their dated methodology. They don't know how to think about it.

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Lookout's picture

in addition to the tax revamp as you suggest,

a massive solar/ wind/ tidal/ green energy project combined with a national jobs program (more teachers, environmentalist, public workers, etc.) and have living wages for all.

Before you say we can't do that....I would argue the 700 billion (really trillion dollar) defense budget would more than provide for it (hell lets throw in health care for all and free college too with that kind of money). It is the choices...poor choices we make.

When you go buy those negative bonds you better go in a big truck if you plan to bring anything home Wink

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21 users have voted.

“Until justice rolls down like water and righteousness like a mighty stream.”

divineorder's picture

@Lookout .... in support of what you write.

....

....

A Brand New Congress could help that happen, one not hoovering huge mega wads of cash from the Wall Street War Profiteers.

...

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11 users have voted.

A truth of the nuclear age/climate change: we can no longer have endless war and survive on this planet. Oh sh*t.

Lookout's picture

@divineorder

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8 users have voted.

“Until justice rolls down like water and righteousness like a mighty stream.”

Song of the lark's picture

Practically pocket change when considering that there are now almost 12 trillion in existence.

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Song of the lark's picture

There will be three choices for countries: Fascism, left-wing populism, or dystopic surveillance/police states.

You forgot the most likely choice. Accelerated climate change and famine.

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Cassiodorus's picture

The system is foundering upon its own production of negative values. Climate change is only the more obvious example of this. There will be no "green capitalism" because the corporations currently owning your government and mine do not want to pony up the enormous investments to make it possible, nor do they want to foot the bill for the indefinite subsidy of those thrown out of work by automation, nor do they want to scour the planet for gallium to manufacture solar panels so that their owners will not have to pay utility bills for awhile. So we all commit ourselves to another work week while the Arctic methane clathrate reserves are released into the atmosphere, contributing another 25% to climate forcing.

Patel and Moore's newest book, "A History of the World in Seven Cheap Things," offers a twist on the usual apologist boast that the capitalist system is the most "efficient" scheme for distribution. Rather, for the authors capitalism strives daily to discover reserves of cheapness -- ways in which resources can be plundered with as little compensation as possible. Cheapness can be called efficiency too. And as for distribution, when we ask about efficiency we should ask about the recipients of distribution when the system produces enough food to feed nine billion while about 800 million still go hungry, or about those empty houses sitting there while the "homeless" construct lean-tos under bridges. Does efficiency also mean a system of rotating villains when outcomes must be blamed on someone?

Constructing an alternative to capitalism means constructing an alternative social fantasy. At some point the vision of a world comprised of commodities will reach its own expiration date. What's important is the human race's mastery of its own values -- this is where Karl Marx busied himself with endless sessions in the reading room of the British Museum with the problem of the "law of value" and all that critique of political economy stuff that people don't understand so they prefer to read and denounce the Communist Manifesto, a vastly inferior work. At any rate, here's the simple version: the problem with "value" is that, rather than doing what we value, learning what we value, and living according to our values, "value" simply becomes the measure of demand for a commodity, and we become commodities for the consumption of those with "value," those who own the world. Mastery of "value" is one place to start.

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"Earth/Gaia is maker and destroyer, not resource to be exploited or ward to be protected or nursing mother promising nourishment." - Donna Haraway