This post deals with economy and bond market pricing rather than medical heresies. I am posting it because the article is somewhat heretical and is pointing out some (probably intentionally) forgotten aspects of the bond investing that may soon become very important.
Rediscovery of Discount Rate.
Some implications of bond discounting under negative interest rate policy (NIRP) are as follows:
* Banks will not be able to avoid discounting of their own held government-issued bonds (otherwise they would be risking their own insolvency)
* Collateral assets held by the banking system will be loosing value (since the discounting would have to be accounted for).
* Total market capital value of the entire bond market will probably keep growing faster in relation to monetary mass in circulation, due to discounting mechanism applied during the roll-over refinancing at maturity. (At roll-over a borrower must re-pay the principal amount by issuing a higher nominal amount of bonds to offset the discounting). .
* Bond market will have to be made working under the truly open market rules controlled by supply and demand rather than by market administrators. Under NIRP the market will probably not be able to tolerate mispricing or distorsions in the discounting mechanism, because it requires accounting for cash losses or gains upfront leaving very little scope for market losses deferrals and creative accounting. Any attempts at manipulating the discount rate back towards 0, would result in buyers (even government buyers) walking away otherwise they would have to book losses immediately.