Personally, the US government can go f*** themselves.

Why?

YAY we can have more foriegn investors own our country to sway us into wars that we shouldn't be involved in!!

I don't know about all the risk/cost/benefits to jump in yet, Thus I not willing to suffer the consequences until I know what I'm doing.

Another opportunity of Trap?

Don't you mean you included the H/HH bonds 'for completenesses sake' or 'for the sake of completeness'. Additionally it's important to note that a number of these investments may not keep up with inflation and some of them (particularly the short term ones) have recently had zero, and in some cases negative, yields. Caveat Emptor.

@JessMeNU: Read the more comprehensive post.

My grandparents have bought me T-bonds for years on my birthday and Christmas (no doubt influenced by my grandparents being around when War Bonds were big). They still won't be matured for a while, but I imagine when they are I'll use them to pay off student loan debt or buy an apartment or something - it's quite a nice sum all together.

You guys can say "fuck the government" all you want, but I'm personally glad that this was posted. Now I'm that much more educated And hey, maybe it'll be a better option in the future.

The government's not going anywhere - might as well get a little interest out of them. Nice article.

你好!

@JessMeNU: I'm not sure it's a good time now because the rates are going to be low, but it's good to understand them now so that if/when they do recover, you won't need to learn as much. :)

@ajlei: I've always believed it's better to learn something before you need it, if you can spare the time, than to learn it when you need it.

@parrotuya: I know, right?

Now all we need is some propaganda that says to buy war econoclusterfuck bonds.

T-Bills mature in a year or less and don't pay interest. Instead, you pay less than the face value of the bond and get the face value when it matures.

So basically...they pay interest.

These would be great investments if the government would pay in gold or silver. As it stands, I have little faith in the dollar or the government's management of it.

@laserjobs: Why you gotta always make it personal?

@parrotuya: Beat me to it.

@HiPwr:

Yes, because gold and silver are such stable investments.

@Thermopyle: Basically. It seems that what it's saying is that with a T-Bill, you make your initial investment and receive the exact face value upon redemption. You know exactly how much money you will make when it comes to maturity. Essentially, there is a cap on your profits. With a T-Note, you wait for it to come to maturity and then redeem it, you don't know how much money you will make at the end as it is tied to interest rates. If they raise the interest rates, obviously, you make more, if they lower them, less. There is the chance to make much more than in a T-Bill, but also the chance to make less.

Really, what it boils down to is you hedge you're bets with a T-Bill, knowing you are coming out ahead and with a T-Note you're taking more of a gamble.

Actually this looks like a very big Ponzi scheme.

@laserjobs: In other words "We the people" can go f ourselves.

@Thermopyle:

No. They accrue interest, they do not pay interest. The difference is when you receive the full value of the instrument.

Paying interest is about receiving recurring interest payments over time, while accruing interest, as with the T-Bills, is payed all at once when redeemed.

@Thermopyle: Gold and silver have real value unlike paper currency that relies on the backing of a government that has lost any sense of fiscal responsibility.

@HiPwr: Exactly. I'd rather have a small pile of gold than a large pile of dollars. Because with a small pile of gold, you can..... make yourself a really nice necklace. Or parts of a watch. Or a paperweight!

Really, what kind of real value does gold have? Just because people have historically wanted to trade a lot of other things for a little bit of gold doesn't give it real value. Real value = you can use it for survival, without relying on someone else's opinion of what it's worth. Can you eat gold? Drink it? Live in it? You can throw it at someone in an attempt to defend yourself, but that's about it. Gold's value still depends on someone else's opinion of its worth. IMO, that's not real value.

@HiPwr: Gold has value because it is a precious metal; that is - rare. What's so valuable about a piece of paper backed by a government on the verge of bankruptcy? Ask a Zimbabwean.

@cmdrsass: It would be nice if government could be described as "we the people". There was a time when that was true.

@parrotuya: I had never considered that.

Hmmm, yup I remember when they took us off the gold standard what, half a century ago? Luddites saying disaster was imminent? You guys keep saying it, I suppose you'll be right eventually. Everything comes around eventually, just keep ranting.

@Kaellorian: But inflation would kill any returns. So government will be around, but the value of your interest may not be.

@Frank Murphy: Haha exactly.

@HiPwr: ... and in an environment where you would actually need to use something to replace the collapsed Dollar, a hunk of gold would be worth about as much. It's rare and it's useless in real life - you'd be a lot better off hoarding something which you could actually theoretically barter with other people.

@ZekeSulastin: Of course. Food, fuel, guns, and ammo at that point. I'm not talking Mad Max scenario here. My point is that paper currency is only valuable when a government has the resources to back it up. That is why we would never be in the mess we're in now if we wouldn't have gone off of the gold standard.

In a super inflationary condition, gold's value skyrockets. And when things return to normal, gold is still worthing something. It never completely loses its value unlike paper money.

1) Much, if not most of the never-ending bailout is being financed through monetization of debt, not issuance of debt. This means they're simply printing more dollars. Nobody can or will buy the immense amount of debt we're talking about, which means ...

2) You'd be a fool to buy any fixed-rate bond at this point. The huge inflation that Obama and Turbo Tax Tim are about to cause will put you under water on them in no time.

@HiPwr: Question. How is the value of the dollar priced? Compare/contrast with how pegged currencies are. Which is more efficient in liberal economic terms?

@atashida: If it is a savings bond cash it in while still in school to avoid the tax hit. Double check if it is worth it too you - cost / benefit of less interest vs. less taxes.

@JohnAllison: Actually they neither accrue nor pay interest. You buy them at a discount to face value and are paid face value at maturity. You are correct in that there are no coupons, or interest payments.

@Thermopyle:

Basically the biggest difference is that because they do not pay coupons (interest payments) during ownership, you do not need to worry about reinvesting those cash flows.

See: [en.wikipedia.org]

@michaelgibbons:

You can buy TIPS ("treasury inflation protected securities") bonds to hedge a bit against inflation.

[www.savingsbonds.gov]

Another advantage to buying treasuries (even though the rates suck right now): Interest income is exempt from all state and local taxes. That boosts their effective return a bit higher if you live in a state with high taxes (like California or New York). If you live in Texas or Washington, though, there's no advantage.

This is why retirees and rich folk buy government bonds like Treasuries and Munis -- stable investment, steady return, hedge against inflation, and tax relief to boot.

@HiPwr: Well this comment is somewhat irrelevant because all of your dollar-denominated cash & investments are affected by the US monetary policy, not just the money paid out of US treasuries. Like most present-day currencies the US dollar is "fiat money", meaning that it has value because the government says it is acceptable for the payment of public debts and citizens/corporate entities generally accept it as payment for goods and services. Good luck paying for your groceries or electric bill with commodities like gold and silver.

@zolielo: Thinking on the margin pays off

Thanks guys, I didn't see the button. I will check it out now.

@parrotuya:
Good n' U?

"...for completely sake."

Shouldn't that be "...for completeness' sake?"

Maybe the Consumerist editor is on Spring break. ;)

@HiPwr: "we would never be in the mess we're in now if we wouldn't have gone off of the gold standard."

Um. What part of the "mess we'e in" would have been avoided exactly? And how?

@laserjobs: Not vote much?

@laserjobs: Hell yeah. You ever notice, at the bank, that FDIC insured means "backed by the full faith and credit of the US gov"? US gov may have some faith left but damn if we have any credit left when we're trillions in debt - few hundred thousand per person. Would YOU have any credit if you were $100,000 in debt, had no way to pay it off, and everything points to the fact that it's just going to get worse?

0.70% fixed rate, that freaking sucks. The bad thing is that makes them a great deal.

Freaking ridiculous.

@oneandone: The problem with your argument is that anything used as a currency (dollars, gold, shiny pebbles, etc.) is dependent on someone elses opinion of it's value.

Currency is essentially a middleman for the barter system. You have a cow and you want 2 ducks and 2 chickens, but the man selling the ducks only takes pigs as payment, so you have to trade your cow for pigs to trade for ducks, but pigs don't have the same value (exchange rate) to the man selling chickens as they do to the man selling ducks. But what happens when people decide they don't want pigs any more?

@Skankingmike: Ummm... So what foreign investors got us into Afghanistan? Iraq?

@JohnAllison:

Doesn't it all depend on which definition of interest you use?

I'm referring to the basic financial definitions of interest:

"The price paid for obtaining money."