I am about to buy some government bonds. But, I have taken a closer look at international investment options. Many of the popular funds put a lot of money into the U.S. government, Japan, and other well established companies. However, if you look at the debt to GDP ratios of U.S. and Japan and see how it keeps growing, that will make you start wondering.
America is at 104% debt to GDP.
Unfortunately, the largest contributors are not China and Japan like we think. It is the social security administration. And when America goes bankrupt and we become the land of paupers as my guru predicted, people who paid into the social security system (which is mandatory) will not get their money back, or at least not the total amount. The SS administration is a ponzi scheme where the young pay into the system so the old can retire. Personally, I feel we should all have retirement accounts that we control as well as medical accounts.
Japan is at 229% debt to GDP
How can Japan afford the interest payments on this phenominal debt? The answer is that interest rates in Japan are negative, at least for the time being. How can this be? The same scenario is in Norway. It looks like the entire world is going upside down in ways that are completely unpredictable. But, what happens if interest rates rise in Japan? The entire government will go broke within a few years! After seeing what is going on, I’m convinced that the banks artificially keep rates low to keep the government in business, otherwise they will all go underwater. Meanwhile, real estate prices have been going down little by little every year for twenty years. Is this what America has to look forward to? How bizarre. I think it is entirely possible since the government is the slave of banks and the banks are the slave of the government!
What if there is a depression?
Some of the less stable countries like Mexico, Columbia, Venezuela, Brazil, African nations, etc., could easily go broke if there is a severe worldwide depression. So, when I look at credit ratings, what I really want to know is how well you’ll do during “the big one.” In California we talk about having a big earthquake called the big one. But, how about a huge financial calamity?
Currency devaluation
Some countries like India offer competitive interest rates, but have currency devaluation. You might get 9% or 6%, but how good will that be if the currency loses value at a rate of 5% per year, or perhaps 20% in a particular year?
Summary
There are many depressing things to think about when it comes to international bonds. Worldwide economic downturns, devaluation, and governments that are drowning in debt (and perhaps sake.) Will you ever get your money back? Or will you make a fortune if interest rates go down even further? Or maybe this is all part of God’s plan to end lending money for interest by making all interest rates in the world zero or even negative. That means you pay someone to borrow your money. Get real!