Many people throughout the world buy gov’t bonds as a safe haven investment. They voluntarily give the gov’t their savings for the state to consume. In the future when the debt matures the savings of other people will be confiscated via taxation and/or more debt will be issued and bought by other voluntary savers/lenders and the central bank (counterfeiting) to pay the creditor back the interest and the principle of the bond.
Considering the central bank confiscates wealth from owners of fiat money to buy bonds and gov’t confiscates wealth from citizens via taxes, both these activities create a loss of value to those citizenry that do not directly benefit from gov’t spending - the non-parasites who don’t feed from the gov’t trough.
Buying bonds supports the establishment of the state. It enables them to maintain their size or to grow. Many statists argue that the gov’t does good with your money, like protects us with their war machine or provides the central economic planning and redirection of private property / capital to those plans because the free market would not be able to allocate enough resources to provide such achievements without the coercive hand of gov’t: like interstate highways or railways or all the technology provided by the space program.
The simple fact that the state holds a monopoly on force and legalized theft should be sufficient reason not to buy bonds. Supporting the state supports these activities. I personally see their activities as illegitimate.
I used to buy gov’t bonds in my 401k to reduce the risks and volatility of stocks. Over a year ago I sold all my bonds due to inflationary reasons. Even though I believe interest rates will be rising later this year and that it may appear that bonds will one day become an attractive investment (not really), I am having second thoughts based on by Libertarian beliefs about buying bonds.
What do you think? Any Libertarians / Ancaps here that own gov’t bonds?
It’s bad enough that the government steals our money and uses it to murder and steal from others. I certainly would think it’s immoral to voluntarily loan them money which they will only pay you back in by stealing from somebody else.
From an economic perspective at the moment, somebody would have to be a total moron to be long Treasuries. I think somebody would have to be nuts to hold any fixed income at a time of record low rates when it seems rate increases are not so far down the road. And let’s be clear, it’s not going to be a tiny bit of rate hikes within the medium term: interest rates are going to go through the roof (at least in the US). I’m currently short the 10, 20, and 30 year Treasuries.
All I know for sure is that I laughed out loud pretty hard when I had the option of redirecting my tax “refund” from the IRS criminals to a US savings bond. I didn’t realize they had a sense of humor at all. [:P]
I don’t think ethics and investment have anything to do with one another. If you think you’re going to make money being long on treasuries, do it. I personally don’t think anyone is going to make too much money buying treasuries, I don’t hold any myself, but I don’t think someone would be unethical if they thought otherwise and decided to buy the bonds.
Even if it is unethical, does that really matter? We’re talking about investing here, the point is to make money. I personally couldn’t care less about ethics when I’m investing, I’m trying to make as much money as I can. The end, as far as I’m concerned.
It’s simple: when government issues bonds, and pays them off later by issuing more bonds to cover both the interest and principal, while bidding increasingly higher interest rates to get those bonds sold, the result is capital being siphoned away that could have created jobs in the private sector.
Why should capital be lent to entrepreneurs or invested in businesses when the holders of that capital (like savers) get better returns putting them in bonds?
Those bonds are going to build bombs that are to be dropped on Taliban villages, pay the higher-than-average salaries of unionised teachers in public schools with 20% graduation rate, or run poor quality state-owned public transportation. They are not, however, going to entrepreneurs finding cure for glaucoma, engineers offerring earthquake-proof building design systems, or automobile companies wishing to start a new project for a car that runs 200 kms a gallon. And with less capital available for private sector projects, what hope would you have for high paying jobs in a capital-intensive service sector job?
This is an interesting response. It looks at the question in the roundabout economist way.
I’m looking at it from an investor’s point of view. If I can make more money buying treasuries than I can by buying something else, I’ll do it. Because my first concern is to make money. You’re saying that this could lead to other things happening that reduce the payoff of this decision. But that’s really not my problem. If the government can offer to pay me more to use my money, they get it. If the private sector can offer me more, they get it. As an investor, I’m not trying to give my money to the thing that’s going to be the most socially beneficial or have the greatest effect on the economy as a whole, I’m trying to get the highest possible return on my investment.
Now, you may argue that I will not get a great return on these bonds, you’re probably right. I don’t believe I hold any at this point in time. In fact, most of what I hold is commodity-based, foreign currency-based, foreign-debt based kinds of things, plus lots of indexes and other things. It’s a widely diversified portfolio but with a general theme. That theme is that dollars are going to be worth less in the long term, better find some way of maintaining my purchasing power. HOWEVER, if I thought the best way to do that would be to buy government bonds, I’d do it. I just don’t happen to think it is. Ethics has never entered my mind in any of these calculations, because my concern is to make money.
So maybe buying the bonds is unethical, I don’t really care. Not my problem. Perhaps that should’ve been my answer all along.
bloomj31’s view that the point of investment “is to make money” is itself an ethic that he holds.[:D]
It’s strange how people who try to look at matters from consequentialist or utilitarian grounds feel that they are taking a value-free approach, when consequentialism itself is a value-based normative approach. Is there a value-free value on which you decide the value of something?
Either way, the Devil never made a deal with you for something you couldn’t honestly achieve by yourself. In this world, where the poorest of the poor have become incredibly rich - all the way from Henry Ford to Woolworth - there is an inexhaustive list of ways to prosper, even if you are in Communist Russia, as was the case with Roman Abramovich. Even extremely unpractical men like my grandfather who valued ideals more than money somehow ended up making enough money anyway.
Fact is, murder and theft are also ways of making money, with more than 100% return on investment, and there’s nothing stopping you from also becoming a high-level special forces officer who kills A-rab terrurists and trains secular Somalian warlords in return for a six-figure income. I just feel some peace of mind, stability, and minimum frustration for myself and others is worthy of giving up that sort of income, and I can anyway earn more than that through less destructive means.