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Stockman Slams The Risible Myth Of The Savings Glut And The Lunacy Of Sub-Zero Yields

• by David Stockman

The fact that in September 2017 Austria was able to issue a 100-year bond at a mere 2.1% yield was crazy enough. After all, the old Austria (Austro-Hungarian Empire) disappeared exactly 100 years ago at the Versailles Conference; the rump state left behind was nearly crushed by Hitler in the 1930s and the Soviet Union in the 1950's; and for the last 70-years inflation has averaged 2% at least, while the welfare state keeps growing and taxes keep rising.

So why so-called "investors" purchased a 100-year bond with the prospect of virtually no yield after inflation and taxes and a reasonable doubt as to whether the Austrian state would survive to 2117 was always a bit of a mystery.

But it could perhaps be explained by the Greater Fool theory. That is, there wasn't much yield to be had anywhere else in Europe, and a smart asset manager could always collect the 2.1% yield and  get out of Dodge at the first sign of credit weakening, rising inflation or default troubles by dumping this dubious paper on the next in-rotation mullets.

That was then, and as they say on late night TV, there's more. Much more!

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