This is a complex topic. We will be discussing several layers of the financial industry that are all changing, and then disappearing.
Bitcoin, and the like will destroy bonds, and then replace bonds, and then bitcoin will no longer be bonds, and bonds will disappear.
It all comes down to, where does money come from?
And this is not an easy question, nor is there an easy answer. We can look at the Fed, at fractional reserve lending. We must also look at the thought construct of the men in 1st world countries.
But, in this post, we will try to comprehend bonds, and why they are important to the retiring boomers, and why they are dying, and how to save the boomers' retirement.
For most "investors" bonds are a place to park currency. Some place to put currency, while you are waiting for the next opportunity. But the rest of the investors are there for continuous income. For doing things like funding retirement.
And thus, most retirees move their investment money heavily into bonds when they retire.
And thus, the group that needs bonds to have a high yield the most is the boomers.
To bad, that right now, the bonds are paying such low interest rates. Just when the retirement accounts need to make up for the lack of earnings. (difference between what they promised and what got delivered)
There are stocks that pay out a very steady dividend each year, but even with these, payouts can change drastically. Retirees need more even payouts, and so, the govern-cement bond has become the go to.
But, the thing that allowed govern-cement bonds to exist, is now almost gone.
Govern-cement bonds shouldn't exist; can't exist.
There are two ways to pay the interest on bonds.
Early in America's life, they charged imports a fee to be allowed into the country.
And after they dropped the gold standard, (with WWII) they could print money.
(If you have real money, like, say, gold, when you charge interest/pay interest, it is like taking a bite out of your money supply. So, literally, over time, paying interest on bonds will leave no money in the system, and if a foreign entity bought the bond, that money doesn't reenter the system at all, making the gold disappear faster.)
So, as we create a new monetary system (the Dollar is dying, and the Yuan, and the Euro…), if it is a sound money system, then you cannot have interest paying bonds. Especially if we choose bitcoin. (We will see the debt interest owed exceed 21 million and EVERYONE will know that it can never be repaid.)
Bonds will not exist in the future with sound money.
Retirement accounts NEED interest rates to be higher or they will run out of money before the retirees kick the bucket. This is why these retirement accounts are going to very high risk, hopefully high yield, investments. And retirement accounts really should not be investing in high risk.
So, the financial system is pivoting to buying highly appreciating assets. Bitcoin, Ethereum, Ripple… to name a few, where their value is going up faster than the destruction of the fiat currencies. The plan is to buy bitcoin, then sell off a portion as its value goes up to make payments to the "new bond" holders.
They are making a new form of continuous payment monetary vehicle.
And this may save the boomers' retirement.
The problem is that this is just a bandage. It will work while fiat currency is flowing into the cryptos. When things level off, or people stop accepting fiat, when we accept bitcoin as the money, the thing of value all other things are priced in, then all we can do is pay out the bitcoin payments from their stash of bitcoin.
But, until then, fiat currencies will go down.
And the bonds that are denominated in will go down.
And the younger generations will just put their fiat into bitcoin, until they are each paid in bitcoin. And then there will be no more bonds.
