Even More Pathetic

The returns from our Treasury bills are even more pathetic since we last wrote about the subject.

$1.52 of interest on $10,000 invested over 13 weeks amounts to an annual percentage rate of 0.06%.

And it's pathetic-to-the-max when we factor in the inflation rate over the same period (the higher the inflation rate, the less the dollar will buy, i.e., the less it is worth).

The Bureau of Labor Statistics reports that inflation was 1.4% during the first quarter of 2011, an annualized rate of 5.6% (higher if one compounds monthly or quarterly). (There are many who believe that the inflation rate is closer to 10%, but let's put that argument aside.)

The purchasing power of $10,000 on January 1st had deteriorated to $10,000 x ( 1/1.014) = $9,862 on April 1st. My $10,000 lost $138 and gained $1.52 of interest. Is it any wonder that America's foreign creditors are getting out of Treasuries as fast as they can? © 2011 Stephen Yuen