Negative Yield on German Debt

This week, Germany sold €3.9 billion of six-month Federal T-bills at an average yield of -0.0122%%. This has good and bad implications. It reinforces the fact that Germany continues to be a safe haven for investors and a bulwark economy against the effects of the Euro Crisis. Germany's conservative approach to monetary and fiscal policy in recent years is paying off. The bad news is that investors' safekeeping money under the pillow suggests a general bleakness in expectations. Such beliefs quickly translate into the real economy because when risk capital drys up, so does entreprenuerial opportunity and the possibility of new job creation. A similar phenomenon occurred in Japan in the 1990s. Record high household savings rates, reflected in negative yields on Japanese Federal bonds exacerbated years of zero job creation.