Topic: Why do people keep buying bonds when the government is in debt? (Read 1598 times)

This is true of any financial asset, including stocks and real estate.

We know stocks and housing are artificially propped up by low interest rates dictated by central banks -- so they are over-valued, similar to government bonds that are over-valued when you look at the sheer amount of debt the government owes.  (Bonds are propped up by public institutions in multiple ways, one of which is central bank buying with freshly printed money.)  But people buy all these assets all the time.

Ultimately, buying these assets is a bet that the propping-up will succeed, at least until we sell the propped up asset.

The essence of the modern world system is that savers are robbed by having to gamble on whether financial asset manipulation by the elites will succeed during the time horizon under consideration.  The elites are much better positioned to win in this game, and one of the reasons is that they have much more detailed information about the chances of these bets.

Because people are irrational in economic thinking. They buy cars while in debt for luxury. How can someone have luxury in debt position?

The answer is no. The governments bonds are money borrowed from the State and as such are secure. So you have the security that you will have back your money and its interest (normally) the day in which they are matured. The word "normally" is connected with situations which are extraordinary and have great impact in the life of one country (for example an war). In that cases the bonds cannot be given but not denied. Never. Even in its more difficult days normally every government give the money of bonds and their interests to the owners. Not only that but offer others (if it is in difficulty) will higher interest. Even, the main thing that the people invest in bond is not the interest but the security of the money given to buy the bonds. Is the given of the money to the State which never deny its debt to its owners. For more about government bonds you can learn here: https://en.wikipedia.org/wiki/Government_bond

they don't have to, as long as they keep creating toilet paper out of thin air, this how it works out there, and how it always worked, they do not want to change their perfectly scam strategy, until it keeps working good

The debt of govt doesn't matter because they too NEED people to buy bonds. As the priority increases, they need to make sure people invest and to make sure that happens, they ofcourse need to return their interest on time. Hence, it is one of the safest investments. And what comes with safe investments? Low interest.

Government bonds have always been one of the safest investments, as they always have to pay back because it is a liability of a greater priority to them.
They require people to invest in the government bonds as well as it creates extra working capital for them. The interest rate is usually low but it might be more for other countries. Here's a list:

http://www.investing.com/rates-bonds/world-government-bonds

It's like a religion. Many people believe in government, they think they're doing something good and useful when they buy government's bonds. Some people love their national flag, too. They keep one at home, and they're proud to show it off. Sometimes, the government is corrupted, the country is on the verge of bankruptcy, but some people remain proud and happy.

No. They are not safe. A number of nations have defaulted on their debt, making their bonds worthless. For example, Argentina defaulted on $82 billion worth of bonds in 2002, in an incident known as the Argentine economic crisis. However, the Argentines did some debt restructuring later, paying back the bond holders some 30% of the amount owed. Still, the bond holders suffered a 70% loss on their investment.

They are safe financial investments. Simple. It doesn't matter if the country is in debt or not. For one, almost all countries are in debt to some degree. That does not, however, determine the default rate of these bonds. You can pretty much get a ROI slowly but surely with most countries that are in debt at the moment, like the US, or some other developed country.

First of all the bakruptcy of a country is very much different than a bankruptcy of a business. Critically one of the major difference will be that there isnt any international court to settle this kind of defaults. Basically the government will restruct their debt by either asking for more time to pay or rather lend more to pay (whichever is better).
Truly it will be hard to imagine that a country "shut down" immediately after announcing a bankruptcy. For bondholders, this situation is indeed risky however with the country going into default then the bondholder will be allowed to hedge their risk with their bonds

Even we know the gov is keeping printing money but we still keep buying bond! Because we know bond is one of the most secure  investment tools and our economy is inflationary. In order to counter this situaton, we seek bonds as our secure invesytment. As long as the economy is running well, we will get paid back plus interests.

the only risk it could be if the gov is corrupted or if the gov of your country get bankrupt, but it is not somethign that happen over night

in the worst case you can sell with a small loss, because the spread is usually very minimal, seeing how they play with a very small interest even below 1%

Government will never default, they would just print some money to pay back the debt, so the risk of default is almost 0

Many investors have so much money that they don't even bother risk it, even a small interest will give them millions of dollars of income per year. And typically it is the central bank who buy large amount of government bonds to adjust the money supply

Anybody who issues bonds is in debt. 
If you do have money to invest, well-rated government bonds are the safest avenues for investment.

Certain investors, for example pension funds, are limited in what they are allowed to invest in. Government bonds are usually one of the 'major' areas where they are allowed to invest due to bonds being rated as a relatively low risk investment as the bonds are backed by the country who issued them. So there will always be buyers of bonds largely because of this, even with negative rates on bonds.

Additional to this you have institutional investors who head to bonds in times of uncertainty and or in times of escalating interest rates. Many are also busy getting out of the stock market as more and more are starting to realise that the 'cool-aid' driven rallies are nearing their end so the money is moving into other areas like bonds which is considered a better or more secure option.

Add to that the US Fed who has been promising a rise in rates [guess it will only happen in 2017] and that is also fueling bond buying.

And also do not forget that some central banks are often the largest bond buyers in the market in their efforts to keep a dead and collapsing system alive through artificial means. So a large part of the bond sales you see are actually being bought by the very people who issued them [very simplified I know].

As other have said, there are countries where bonds are a very good investment and where those countries are not in debt so the risk of a default is very low. So bonds can be a very good investment but I'm afraid that the bonds in the US and the EU is a joke.

Its not the right time to increse rate and shouldn't be until we see explosiv inflation. The jobs we have witnessed are easily evaporated when we pass over this construction season and increase interest rate. If the economy is grown fully and judgd by fed being so, demands for bonds will be stronger and even rated lower irrespective of higher interst rate but fed should try to narrow down trading deficit as much as it can.

Hmm... but things have changed a lot. The government bonds are not 100% safe, as evident from the instances involving Ukraine, Greece and Argentina. Right now, there is a feeling among some governments that debt can be written off, if there are sufficient reasons to do so. An example is Ukraine, which is refusing to honor the 3 billion Euro-bonds issued to Russia.

I think the government bonds exists since a long time and I believe that people have more faith in Government bonds as in the past there were no more options available for the investments and people were sure that their money is safe by investing in the government bonds.

also not every country have high debt some countries have not been touched by the crisis, or were only partially affected, not totally like many other, so their bonds have still plenty of value, and we know that people like to risk for a quick buck, so they don't bother with what there is behind the scene they care about they finally profit

Who pays the interest?

The USA is only going up in dept.

That depends on the nation, which is issuing the bonds. Some of the countries issue bonds which are having a very low risk of default, such as the United States. But these bonds usually have very low interest payments, like 3% per year. On the other hand, there are bonds issued by "risky" nations, which are having higher interest rates.

Isn't it a greater risk to buy bonds when the government is in debt?