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When Interest Moves Past Zero

The opinions expressed by columnists are their own and do not necessarily represent the views of Townhall.com.

What’s a person to think?  Each and every day, some of the most well-read and most-listened- to luminaries continue to proclaim the death of U.S. Treasury securities. 


“A bond bubble,” they say, “that will incinerate any poor soul who continues to hold the worthless U.S. debt obligations." 

After all, with a current 1.7% yield on the benchmark U.S. 10-year note, how could interest rates possibly go any lower?  As a radio talk show host, I’m surrounded by real estate folks — and that includes other radio show hosts — who, in commercial format, proclaim, “Buy now and refinance now, rates never to be this low again.” 

In addition, all the financial guys and gals are presently declaring the outright stupidity of buying U.S. Treasuries, “How can you expect to stay ahead of inflation when you’re only earning 1.7% on your money?” 

And, of course, they add, “The guaranteed decline in principle is enormous — stocks are the only way to go since U.S. Treasuries are doomed.”    

So, what’s a person to think? 

You see, being on this earth for over sixty-years, I’ve experienced this exact same commentary again, and again, and again.  In fact, in the early 1980s, with inflation pushing 20% and mortgage rates in the double-digit range, when the moment finally arrived and the U.S. 10-year note fell below 10% while mortgage rates ultimately went single-digit, the pundits proclaimed, “Never again,” “Once in a lifetime,” “Get a mortgage,” “Refinance,” and, of course, “Sell your bonds, we won’t see single-digit mortgage rates for years.” 


For almost thirty-years, I’ve been hearing the same siren’s call of stocks over bonds, with the loudest cries coming in 1999, 2008, and, of course, right now.  It would be very foolish not to think that we’re closer to the finish line than ever before. 

However, contrary to the message of the illustrious bald-headed “Dr. Bob” (Robert Froehlich) who has been lecturing around the country, financial markets do go much further than even he can conceive and the finish line might not yet be in sight. 

Historically, the so-called bond experts were shouting, “Sell, sell, sell,” when the U.S. 10-year note broke below 8%, 6%, 4%, and even 2%.  To most people, the problem would appear to be that it is simply inconceivable that interest rates could go to zero. 

Perhaps if the pundits considered the reason for holding U.S. paper as not to be the professed return on investment, but rather the return of investment (an old adage, fairly trite, but true) their opinion may change. 

After all, why would any person in their right mind currently invest money into a Swiss bond only to be forced to pay for the privilege — yes, it’s called a negative return. 


Taking this viewpoint, a 0% interest rate may not be the end, but possibly only the beginning. 

An intriguing concept, don’t you think?                 

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