Zero chance.. like seriously zero chance:PFollow

"restructuring" is just another way of saying corporate sell offs.

Who do we all owe all these debts to, anyway?

I mean seriously, can someone answer that for me? Who does America owe their debt to?

Who does Canada owe their debt to? Greece? Any country...

It seems like almost every country in the world has a debt (how many countries don't?)

Who do we owe all this money to?

The Swiss. Everyone owes the Swiss. Even the Swiss owe the Swiss.

Government debt is weird. It's not done in giant loans, but instead, in the form of treasury bonds. The US (and other countries) has these for sale, and anyone pretty much can buy them. They mature in a length of time, at which point you collect the bond and an amount of interest on them. You'll probably make more money on the stock market in that length of time, but bonds are a much more secure investment since the US is pretty much guaranteed to pay them back.

So Japan and China buy up quantities of them (and so do American citizens - lots of grandmas buy the 20 year bonds for grandchildren for college) and then the US has to pay up those bonds at the time of maturation.

That's pretty much how wars and **** were funded back in the day. Ever hear of WWII war bonds? Funny how we never got any Afghanistan war bonds, or Desert Storm war bonds. I guess there wasn't much of a need, what with China snapping up normal treasure bonds left and right because it was considered a surefire investment.

Well, it depends on who you are. They used to be popular baby gifts in general, and no one outside the family was going to be opening a savings account.

Plus, while they are less profit than certain savings programs, they're more reliable than them and stocks (at the moment). If the bank you uses goes bankrupt, you'd end up in a pretty rough spot. And stocks can obviously crash (I know you didn't mention them).

I think I actually have bonds that I can cash in... I should ask my parents about that.

They used to be super popular, way back when (like in the late 1700s through the early 1900s). Unless you had a literal gold mine, or gemstones and such, you generally stored your fortunes as gov't bonds (which were also treated somewhat like gov't stock, because the payout was a guaranteed amount in your country's currency, which meant the value of different bonds fluctuated as time went on).

If your gov't was stable (and not apt to inflation), it was a very wise move. If it isn't, it's a horrible one. For example, America during the Great Depression. The value of money dropped so significantly that bonds became nearly worthless. It was much better for people who had invested money in practical items that they could sell/trade for the goods they needed.

But there's a flip side to that. The more people buying bonds, the more money the gov't has. And if it's ultimately turning a profit, like the US was for a long while, then buying them is great for the economy.

Isn't the minimum investment for a CD $500 though? The Treasury website tells me the min for a bond is $100. Lower investment, lower interest, lower yield. Makes sense.

And since most people probably aren't prepared to give a $500 gift, it's not surprising they give bonds.

Actually... it looks like the interest rate for a US bond is somewhere around 4%, every 6 months, for 30 years (IDK if old ones had shorter maturation times).

Don't CDs have like 1-3% APY generally? That's a MUCH smaller return, especially if you buy the cheaper ones... It's compounded by the fact that they mature much faster though.

[EDIT]

Okay... I'm getting really confused... I'm seeing many conflicting things about the interest rates for government bonds.

Still though, the lowest I've seen is about equal with the CD APY rate, except it's biannual, so it's even better.

Edited, May 6th 2011 10:59pm by idiggory

Though the 30 year bonds have an interest rate of 3-4+%, biannually. A $100 bond would pay out at $328.10. Not bad. I honestly don't know what other investment programs would give, but tripling an investment over 30 years is pretty nice.

But let's talk about 20 year bonds, since they're most likely to be given as gifts I'd imagine.

1% interest- $122.08
2% interest- $148.89
3% interest- $181.40
4% interest- $220.80
5% interest- $268.51

Doesn't seem that bad of a gift to me. I've been googling, and I can't find any 20 year CDs with above a 4% APY. And that's going to be a much lower yield, since it's annual instead of biannual. And most don't even last that long--I'm seeing 1 to 5 year CDs with 1-2% APY.

Bonds look like a much better investment to me.

[EDIT]

I think the relevant issue here is time. If you are looking for a fast increase, then a CD is probably better. But if you are looking for a longer investment, bonds are far from being a crappy choice.

Edited, May 6th 2011 11:41pm by idiggory

Okay, no offense, but your first point's kinda stupid. The average person has no idea how to make a wise investment on the market. Let's talk about average people here, because it's obvious that the economically savvy are going to see much higher returns.

Plus, unless you are the kid's parent or a really close relative, you aren't going to be watching the market in the first place. It's more like you'd invest and hope that in 18-20 years you actually... y'know... made money.

The 20-year demand isn't really a problem for a gift, so I'm assuming we are talking about personal investments here. And it's a reasonable concern. But to be fair, if you are looking for a good return with minimal effort, then bonds aren't an awful choice.

Interest rates are at an all time low for pretty much everything, aren't they? You're still fortunate that a bond has a bi-annual rate.

And the interest on bonds is tax-free, according to the treasury website.

And I have no clue what a 527 is, but wikipedia is telling me it's a tax-exempt organization intended to fund candidates in political races.

I'm assuming you meant a 529? These are certainly a good idea (particularly because you don't need to lock up the money). And many of them get to avoid certain state/federal taxes. But they can only be used for college investment, AFAIK. You can't just make one for yourself. Many of them also have expenses built in--for instance, I'm looking at a NJ-specific one right now, and it will eat as much as 2% of what you put in. That's not a small sum, in the long run.

The nicest part of this one is that NJ ignores it when it comes to issuing state aid for education. IDK if that's universal or not. But very nice if you have a lot in it.

I can't find the interest rate on these accounts anywhere, but I'm assuming it's decent. Definitely a nice alternative, if you are looking to provide for a child. But that's all they are good for--giving a gift to others or making a personal investment is a different story.

So what would you recommend for the average person who doesn't want to be too involved, but is looking for a decent return on a moderate investment. Assume that it's fine for the funds to be locked up for 10-20 years (maybe they're just trying to be sure they'll have money to travel later in life or something), and that they'd only be investing a relatively small sum of money (maybe $500-2k).

You are free to assume that they plan to do so for several years (say... 5). You can also assume they have a 401k that they contribute to, as well.

The cost of using an investment counselor needs to be factored in, of course.

I honestly don't know enough about investment opportunities to know what would be a wise course of action. But it seems like CDs would not be the wise choice in this situation--the best 10 year one I can find requires a min investment of 2.5k and only has an APY of 3%).

I still don't know what a 529 is. D:

I'm assuming that, if the kid doesn't go to college, you actually need to pay the taxes on the cash though?

I see. What kind of interest rates do these things see?

Average from the 70's to 10's is ~10%.

8% is by no means terrible, as the ~10% includes S&P funds.

One interesting strategy is to buy what hedge funds are buying so as to not pay the fees but that's pretty micro heavy.

This is the point missed by people who say "What if China calls in all our debt?". They can't as their pay-out is tied to the terms of the bond unless they want to lose a substantial amount of money in the process. Calling in all their debt would be akin to giving the US government a nice cash donation.