Re: [Marxism] Recession in the works?

[Carrol Cox <cbcox@xxxxxxxxx>]

Jon Flanders wrote:
>
>
>
> Higher interest rates would benefit bondholders.

Rates & Bond prices move in opposite directions. Hence all bondholders
are seriously hurt by higher interest rates. Their bonds continue to pay
the original interest, but they have to sell them at a lower price.

A 10% 10 year $1000 bond pays $100 a year. If interest rates double to
%20, the bond is now worth only $500. And it will still be (say) 8 years
before it can be cashed in for the full $1000. So your paper worth is
cut in half by a doubling of interest rates. (New bonds(government or
corporate) make a very small part of the total bonds in circulation.
"Investors" buy & sell bonds as they do shares.

Carrol


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