Australia Launches First Ever 30-Year Bond

11.10.2016 • Central Banks, The Economy

From Kris Sayce – Port Phillip Insider (Australia) –

The old refrain about governments going into debt is that it puts a burden on this generation’s children. Well, that saying now needs an update.

Now the government’s debt will officially put a burden on this generation’s grandchildren.

But aside from that, check out the banks involved in helping the AOFM — and by extension, the government — issue these new long bonds. Is it any wonder that the banks are quick to urge governments to go into debt?

The more governments go into debt, the more they need to issue bonds, and the more the big banks can charge in commissions for dealing in the bonds.

Not only that, of course, but the banks then typically encourage governments to ‘invest’ the bond proceeds into infrastructure. No prizes for guessing who gets the money. That’s right, the biggest Aussie construction companies.

Why should that help the banks? In two ways. First, the big construction companies are the banks’ customers. Secondly, the big banks control more than 80% of the Aussie funds management industry, which derives fee income from the money that flows into the superannuation industry.

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