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Subject:  Re: Interesting article on deflation Date:  10/28/2001  12:06 AM
Author:  Mark0Young Number:  54184 of 883345

I-bonds are "D-bonds" as well. They have a 3% minimum yield which is better than any Money Market or government bond would give you under [severe] deflation.

If you are talking real return, yes.

If you are talking nominal return, No! According to "Frequently Asked Questions about I Bonds", the rate can be zero. Specifically,

5. Can I ever lose money in I Bonds?

No. I Bonds are U.S. Treasury securities backed by the U.S. Government. I Bonds even protect you from the effects of deflation. In the rare event that the CPI-U is negative during a period of deflation and the decline in the CPI-U is greater than the fixed rate, the redemption value of your I Bonds will remain the same until the earnings rate becomes greater than zero.

Since this is directly from the Bureau of the Public Debt, the issuers of I-Bonds, I would tend to think that they know what they are talking about when it comes to I-Bonds.

--Mark (who has $7,000 of "Public Debt" in his safe deposit box) Young
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