Ed Driscoll

In Soviet Europe, You Pay Banks To Hold Your Money

Germans manage to do strange things with money during times of crisis — during the Weimar-era of the 1920s, hyperinflation led to the Bauhaus-designed million mark note, seen above. (And ultimately far, far worse things over the next 20 years.) Today’s Germany, a safe haven in the otherwise seemingly imploding EU, is floating the negative interest note. In other words, it’s “Zero Hour: Panicked European Investors Pay Germany to Take Their Money,” Joel B. Pollak writes at Breitbart.com:

As investors panic over the debt crisis in Greece, Italy, and Spain, Germany has emerged as a safe haven for investors–so much so that the interest rate on ten-year German government bonds dropped below zero on Friday. That means investors are so desperate for security that they are willing to accept less money at the end of ten years than they invest today; they will pay the German government to take their money.

Bloomberg News reported on June 1:

Germany’s 10-year bunds, Europe’s benchmark government debt securities, headed for a seventh weekly advance, driving yields to an all-time low. Austrian, Dutch and French yields also fell to records as a report confirmed euro-region manufacturing contracted in May…

The German two-year yield slid to as low as minus 0.002 percent, the first time the rate on the securities has been negative, according to data compiled by Bloomberg, and was at 0.005 percent as of 9:03 a.m. London time. The price of the zero percent note due in June 2014 was at 99.99.

Investors are betting that less money in a decade is infinitely better than no money even sooner. Presumably, these bonds won’t be held until maturity, merely until the EU’s crisis is over. (Which may or may not happen in less time.)