What could happen is that, in a concerted effort, central banks around the world would essentially buy up all the government bonds. It’s possible. We don’t know. The U.S. Treasury and the ECD. Actually, the Bank of Japan is a good example. They’re buying all the government bonds that the government is issuing. What the outcome will be, we don’t know for sure, but again, my view would be that the outcome will not be very favorable. At some point, yields on bonds will go up.
Now, you may say, “Okay. If the government buys all the government bonds, how can yields go up?” Well, they can go up because there is a lot of debt outstanding already, and whereas the government debt may not collapse in price, in other words, yields on government bonds may not go up substantially. What may happen is that corporate bond yields, and in particular, high yield bond yields could go up substantially.
But I’m just trying to say, in my view, the current regime, run by central bankers, is not going to end well. I mean, someone has to pay for the government’s expenditures, and if you have these kind of deficits that we have in most countries, eventually something will happen. And we do not only have rising government debt. We have rising corporate debt, rising household debt, and so forth and so on, and we have the unfunded liabilities. Nobody talks about that.
I mean, let’s put it this way, I think it’s important for the individual to think this through very carefully. I don’t think the real estate will be expropriated, because everybody owns real estate, so it’s politically not acceptable, but it can be taxed more heavily, because it’s very visible. So I’m not so sure that real estate is the best investment, but at least you’re not going to lose everything.
Then comes equities, if you compare equities, say. In Switzerland, blue-chip stocks yield, say, around, have a dividend yield of maybe 3%, two and a half, 3%, and the government bond yield now, in Switzerland, is less than 0.25% on 10-year government bonds. So if I buy a thrift government bond for 10 years, the maximum I will earn, if I hold it to maturity, is, as of today, precisely 0.24% per annum. Doesn’t even cover my fees to the bank.
