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Thread: Savings Bonds

  1. #1

    Default Savings Bonds

    I have about 10 EE US savings bonds, and a couple I savings bonds that I've accrued as gifts over the years. I've recently started buying gold and will continue to do so. None of the bonds have reached their final maturity yet, in fact, the earliest bond won't do so until March 2026.

    In light of the economic climate, would it be wise for me to sell these bonds and buy gold and silver?

    In addition, does the "bond bubble" that Schiff and Faber keep mentioning apply to savings bonds? (If so, the answer to my question will probably be obvious.)

    Thanks.
    Force always attracts men of low morality. – Albert Einstein

    Government is essentially the negation of liberty. – Ludwig von Mises

    The great non-sequitur committed by defenders of the State, including classical Aristotelian and Thomist philosophers, is to leap from the necessity of society to the necessity of the State. - Murray N. Rothbard



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  3. #2

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    if it were me... i would cash in my bonds for gold and silver.

    your bonds will lose value if there is inflation. hyperinflation will make your bonds worthless.

  4. #3

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    Quote Originally Posted by Brassmouth View Post
    I have about 10 EE US savings bonds, and a couple I savings bonds that I've accrued as gifts over the years. I've recently started buying gold and will continue to do so. None of the bonds have reached their final maturity yet, in fact, the earliest bond won't do so until March 2026.

    In light of the economic climate, would it be wise for me to sell these bonds and buy gold and silver?

    In addition, does the "bond bubble" that Schiff and Faber keep mentioning apply to savings bonds? (If so, the answer to my question will probably be obvious.)

    Thanks.
    It doesnt matter. If the dollar collapses, the dollars you receive in 2026 wont be worth anything. Get out now.

  5. #4

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    Quote Originally Posted by danberkeley View Post
    It doesnt matter. If the dollar collapses, the dollars you receive in 2026 wont be worth anything. Get out now.
    yeah, seriously.

    Put aside my obvious bias against paper investment and utter lack of faith in US Treasury, I would still not put money into ANY investment for 20 years.

    I do wonder though how's it paying?

  6. #5

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    Quote Originally Posted by Josh_LA View Post
    yeah, seriously.

    Put aside my obvious bias against paper investment and utter lack of faith in US Treasury, I would still not put money into ANY investment for 20 years.

    I do wonder though how's it paying?
    Where would you put your money then?

  7. #6

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    Quote Originally Posted by Josh_LA View Post
    I do wonder though how's it paying?
    Very $#@!tily.

    Yeah, I have no desire to keep these things. All the EE bonds are worth less now then what their giver paid for them, and I'm certainly not waiting until 2038 to cash them in for a nominal "profit." I'm gettin me some silver!
    Force always attracts men of low morality. – Albert Einstein

    Government is essentially the negation of liberty. – Ludwig von Mises

    The great non-sequitur committed by defenders of the State, including classical Aristotelian and Thomist philosophers, is to leap from the necessity of society to the necessity of the State. - Murray N. Rothbard

  8. #7

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    Will there even BE a U.S Currency in 20 years? Let alone.... TWO?! lol...

    Whats the deal, if the US suddenly adopts a new currency and makes the old one illegal or void... what happens to your bonds then?

    “I will be as harsh as truth, and uncompromising as justice... I am in earnest, I will not equivocate, I will not excuse, I will not retreat a single inch, and I will be heard.” ~ William Lloyd Garrison

    Quote Originally Posted by TGGRV View Post
    Conza, why do you even bother? lol.
    Worthy Threads:

  9. #8

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    Quote Originally Posted by Conza88 View Post
    Will there even BE a U.S Currency in 20 years? Let alone.... TWO?! lol...

    Whats the deal, if the US suddenly adopts a new currency and makes the old one illegal or void... what happens to your bonds then?

    In that case, it probably will happen the same as in Weimar republic. They will set a period for you to change your old dollars for the new currency. Obviously it wont be 1:1 and anyone changing dollars wont get a lot of the new currency.

    Hugo

  10. #9

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    Depending on your purchasing dates, the interest being owed as well as being compounded might be something special. I have about 120 $100 EE series savings bonds myself, although they were purchased all the way back in 1981 to 1995. Interest payment on behalf of the older ones was around 18% per year back in the early 80's.

    I really wish people would stop giving such bad financial advice. If you really want to go into gold, than measure your opportunity cost in doing so. If your bonds are already 10 years old, you will have to pay taxes on the interest received once you cash them in. There is a reason bond yields have dried up, investment firms are theoretically paying the treasury (at a very minimal loss) to be locked up. Bond prices are through the roof due to the Fed's open market operations and quantitative easing, yet this does effect current yields.

    The dollar is not going to collapse, and hyperinflation is a total myth in this day. Reason be, the Fed can pull out excess reserves at interval % increases equating to 100% or greater relative to the current rate.

    Inflation concerns based on what? We are in a deflationary price spiral. You Rothbardians got your wish.

  11. #10

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    Quote Originally Posted by Goldenboy219 View Post
    Depending on your purchasing dates, the interest being owed as well as being compounded might be something special. I have about 120 $100 EE series savings bonds myself, although they were purchased all the way back in 1981 to 1995. Interest payment on behalf of the older ones was around 18% per year back in the early 80's.

    I really wish people would stop giving such bad financial advice. If you really want to go into gold, than measure your opportunity cost in doing so. If your bonds are already 10 years old, you will have to pay taxes on the interest received once you cash them in. There is a reason bond yields have dried up, investment firms are theoretically paying the treasury (at a very minimal loss) to be locked up. Bond prices are through the roof due to the Fed's open market operations and quantitative easing, yet this does effect current yields.

    The dollar is not going to collapse, and hyperinflation is a total myth in this day. Reason be, the Fed can pull out excess reserves at interval % increases equating to 100% or greater relative to the current rate.

    Inflation concerns based on what? We are in a deflationary price spiral. You Rothbardians got your wish.
    They wont create inflation? Well then, I expect the economy to crash and the dollar to suffer as a result.

  12. #11

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    Inflation does not automatically mean an increase in prices. Right now, it is about the most inflationary time in US economic history (in regards to Austrian theory), yet prices are continually falling

    It is then safe to suggest that price increases are only a symptom of inflation, as prices are falling in contrary to the quantitative increase. What matters now is not currency, but the psyche of potential buyers. There does not exist, a truly excepted Austrian solution to a Keynesian/Monetarist induced recession/depression.

    Say things were to go to hell, and the financial systems of the world collapsed. Having gold does not mean you possess absolute purchasing power. In fact, it would most likely be several years until good played a true factor as a medium of exchange until the terms of scarcity were established. A result such as what i describe is a result of utter shock and panic. If currency does collapse, what is a hunk of gold to a family with many children, and little energy or food? Highly demanded consumable commodities would be a more accepted medium of exchange following sheer panic and breakdown.

    If you truly believe the US government is going to default, then buy massive amounts of food, ammo, energy. There was an interesting article i seen posted here about the things that will run dry in the case of the "stone age" scenario.

    Assuming that those who propose holding gold right now actually possess the metal, they have a direct incentive to push the demand higher; therefore increasing their wealth in dollars. Be wary of anyone who tells you to hold onto gold right now because "the government" is going to collapse.

  13. #12

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    Quote Originally Posted by Goldenboy219 View Post
    ...
    If you truly believe the US government is going to default, then buy massive amounts of food, ammo, energy. There was an interesting article i seen posted here about the things that will run dry in the case of the "stone age" scenario.
    ...
    The US government doesnt have to default. It can simply print the money.

  14. #13

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    And then, it can buy the dollars back to reduce the amount in the economy. Doing so would increase interest rates.

  15. #14

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    Quote Originally Posted by Goldenboy219 View Post
    And then, it can buy the dollars back to reduce the amount in the economy. Doing so would increase interest rates.
    With what?

  16. #15

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    LOL, the assets they bought in exchange for the dollars they pumped into the economy.

    Please tell me you are familiar with open market operation

  17. #16

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    Quote Originally Posted by Goldenboy219 View Post
    LOL, the assets they bought in exchange for the dollars they pumped into the economy.
    Do you think the rubish that the banks gave the FED in exchange for the dollars are going to be able to take out a lot of dollars? Honestly, I though they were crapy mortgages. Maybe I am wrong and the securities the banks sold the FED are worth something.

    Hugo

  18. #17

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    Quote Originally Posted by hugolp View Post
    Do you think the rubish that the banks gave the FED in exchange for the dollars are going to be able to take out a lot of dollars? Honestly, I though they were crapy mortgages. Maybe I am wrong and the securities the banks sold the FED are worth something.

    Hugo
    No, the Fed does not buy junk debt. That is what the TARP was intended to be, under the direction of the US treasury. The Fed is quasi independent and derives a profit.

    What they would do when prices begin to rise is purchase the dollars with the jumbo securities they purchased from the banks in order to fill the reserves (print). I am not exactly positive, but i do believe the Fed has even dipped into equity stakes in specific banks. An instance of inflation would cause the bank stocks to rise accordingly, which could then be sold back in the open market to pull out the cash.

  19. #18

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    This is a simple one imho.. if you trust that the US government will NOT default and that the US dollar will remain strong then keep those bonds. You're a true patriot for supporting the government in it's efforts by lending it money. To hold this belief you have to believe that the rest of the world will not grow weary of throwing money into the bottomless pit of debt that is the USofA.

    However, if you believe 1/2 of what Jim Rogers or Ron Paul
    or Marc Faber or Gerald Celente are saying.. then you know what to do.

    You might also read some of the many articles over the last couple of weeks about the huge bubble in the bond market and how it is set to burst.

    I've held US bonds in the past.. but not now. Do your own research and decide which direction you think the country will take.
    NC doesn't need ThomTillis as the Republican nominee for US Senate.

  20. #19

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    Quote Originally Posted by slacker921 View Post
    This is a simple one imho.. if you trust that the US government will NOT default and that the US dollar will remain strong then keep those bonds. You're a true patriot for supporting the government in it's efforts by lending it money. To hold this belief you have to believe that the rest of the world will not grow weary of throwing money into the bottomless pit of debt that is the USofA.
    Do you know who holds the majority of government debt?

  21. #20

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    Quote Originally Posted by Goldenboy219 View Post
    LOL, the assets they bought in exchange for the dollars they pumped into the economy.

    Please tell me you are familiar with open market operation
    The presumption is that the government doesnt have the assets to pay off the debts and, therefore, would default. However, it can resort to printing money (the non-borrowing type). So how is it going to buy back the dollars it created? With more dollars?

  22. #21

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    Quote Originally Posted by danberkeley View Post
    The presumption is that the government doesnt have the assets to pay off the debts and, therefore, would default. However, it can resort to printing money (the non-borrowing type). So how is it going to buy back the dollars it created? With more dollars?
    The Department of Treasury, who issues the money for government spending, is a separate entity entirely from the Federal Reserve Bank. It is illegal for the Federal Reserve to purchase debt directly from the Treasury, as this would without a doubt lead to hyperinflation. Therefore the treasury has no control of the money supply, in regards to quantity.

    The Fed does in fact have securities that are highly liquid on the open market, which they can and will use to pull money out of the economy once prices begin to rise.

    Not that i am pro FR...

  23. #22

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    Quote Originally Posted by Goldenboy219 View Post
    The Department of Treasury, who issues the money for government spending, is a separate entity entirely from the Federal Reserve Bank. It is illegal for the Federal Reserve to purchase debt directly from the Treasury, as this would without a doubt lead to hyperinflation. Therefore the treasury has no control of the money supply, in regards to quantity.
    For future reference, most of us know how the system works. But we simplify it.

    The Fed does in fact have securities that are highly liquid on the open market, which they can and will use to pull money out of the economy once prices begin to rise.
    So what? The presumption that is that the government would default. This is a hypothetical situation. It doesnt matter what assets they actually hold.

  24. #23

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    Our kids have a bunch of them, too from relatives over the years who buy them every birthday and Christmas. Dh and I are pretty sure we're going to be cashing them out and buying each child precious metals instead.

    I'm sitting here looking at the 3 my kids got for Christmas from mil, all for $50. Bought at the same time, 2 are regular bonds. One says PATRIOT BOND in bold. That just a marketing ploy?
    “Unless someone like you cares a whole awful lot, nothing is going to get better. It’s not.”
    The Lorax, by Dr. Seuss

  25. #24

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    Quote Originally Posted by danberkeley View Post
    For future reference, most of us know how the system works. But we simplify it.
    It does not seem that way. If the US defaults, nothing is safe, nor is any globalized economy oblivious.

    So what? The presumption that is that the government would default. This is a hypothetical situation. It doesnt matter what assets they actually hold.
    But the US government is nowhere near being "close to default". Lets just say for the sake of argument that the gdp/debt ratio equates to 70%. During WWII, when uncertainties were at a historical low (due to the war and general outlook on the world), the debt to gdp ratio equated to almost 140%.

    If there was a treasury default, inflation would be the least of my concerns...

  26. #25

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    My $50 bond that was bought back when I was born is worth around $70. I think I might cash it in and go buy some supplies.
    Strength through Knowledge

    "What's one more body in the foundations of your Utopia?"
    - This has been a message by Agent CSL.

  27. #26

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    Quote Originally Posted by pinkmandy View Post
    Our kids have a bunch of them, too from relatives over the years who buy them every birthday and Christmas. Dh and I are pretty sure we're going to be cashing them out and buying each child precious metals instead.

    I'm sitting here looking at the 3 my kids got for Christmas from mil, all for $50. Bought at the same time, 2 are regular bonds. One says PATRIOT BOND in bold. That just a marketing ploy?
    Lets say for instance that the bonds i received, which were purchased from 1981 until the mid 90's were instead used to purchase gold relative to the years they were purchased. Given the price of gold at those times, and the overall dollar value they now possess, the gain would not have been nearly that of the bonds.

    Gold is not a long term investment, yet more of a hedge for short periods of inflation concerns. A gold to S&P, Dow, TIPS, etc... comparison reveals that over any long term period, gold has held its value, and not increased it. Is it much better than holding dollars? Hell yeah! But compared to long term equities and securities, it does not stack up in regards to return on investment...

  28. #27

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    Quote Originally Posted by Agent CSL View Post
    My $50 bond that was bought back when I was born is worth around $70. I think I might cash it in and go buy some supplies.
    A $100 bond that was purchased (for $50) when i was born (early 80's) is now worth over $200...

  29. #28

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    Quote Originally Posted by Goldenboy219 View Post
    But the US government is nowhere near being "close to default".
    Buddy, have ever heard of anything called "unfunded liabilities?" Why don't you factor them in, then come back and debate us. Or perhaps read a newspaper, and ask yourself how the government will fund Obama's Newer Deal?

    You're employing rational skepticism, which I normally applaud, however, if you're going stick up for the financial solvency of the federal government, you have a lot of work cut out for you...
    Force always attracts men of low morality. – Albert Einstein

    Government is essentially the negation of liberty. – Ludwig von Mises

    The great non-sequitur committed by defenders of the State, including classical Aristotelian and Thomist philosophers, is to leap from the necessity of society to the necessity of the State. - Murray N. Rothbard

  30. #29

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    Quote Originally Posted by Goldenboy219 View Post
    It does not seem that way. If the US defaults, nothing is safe, nor is any globalized economy oblivious.
    Yeah.

    But the US government is nowhere near being "close to default". Lets just say for the sake of argument that the gdp/debt ratio equates to 70%. During WWII, when uncertainties were at a historical low (due to the war and general outlook on the world), the debt to gdp ratio equated to almost 140%.

    If there was a treasury default, inflation would be the least of my concerns...
    I know. It's a hypothetical. I'd be more worried about getting out of the country.

  31. #30

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    Quote Originally Posted by Goldenboy219 View Post
    Lets say for instance that the bonds i received, which were purchased from 1981 until the mid 90's were instead used to purchase gold relative to the years they were purchased. Given the price of gold at those times, and the overall dollar value they now possess, the gain would not have been nearly that of the bonds.

    Gold is not a long term investment, yet more of a hedge for short periods of inflation concerns. A gold to S&P, Dow, TIPS, etc... comparison reveals that over any long term period, gold has held its value, and not increased it. Is it much better than holding dollars? Hell yeah! But compared to long term equities and securities, it does not stack up in regards to return on investment...
    Buy low, sell high is all got to say.

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