The U.S. government can now borrow money for 10 years at an interest rate of 1.5 percent a year. This is one of those dull-sounding statements that is actually wild and dramatic.
After accounting for inflation — which is over 2 percent — the people who are buying these bonds are losing money over time.
Why would someone essentially pay the US government to look after their money? Because that someone is terrified. Despite the political rhetoric about the deficit, investors still view U.S. Treasuries as among the safest investments on the planet. The more eager people are to buy Treasuries, the lower the interest rate goes.
If you have millions or billions of dollars to invest, U.S. Treasuries are the mattress where you hide your money when you're afraid to put it anywhere else. Record-low rates on Treasuries mean that, around the world, investors are rushing to hide their money under the mattress.