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What I cannot see is why anyone with capital to invest would invest in an instrument whose interest rate seems to be falling to 0% or into 'negative territory.'

Well the short answer is security -- today many people "fear" that General Electric, P&G, Johnson & Johnson, etc. may not be able to pay off on the short term notes (the basis for Money Market Funds at brokers), so these people are removing funds by the boatload and buying treasuries.

The extent of this is significant. Last week US banks borrowed an average of 45 billion a day, this week as of Thursday it was an average over 90 billion a day. Most of that money was being loaned to the likes of Merrill Lynch, Fidelity, Vanguard, Schwab, etc. -- to make up for the Money Market Funds people have withdrawn.

In previous months and years (i.e. normal times), the funds people had in Money Markets were loaned to the commercial paper market - used by the likes of GE, PG, JNJ, etc. as working capital.

We are in a situation where logic and rationality are not present. It is just plain fear and an demand of "no risk" -- I only hope people get a little greed and want some returns before we face the situation where major companies, cities or states do not have the money to meet a payroll. That may sound silly, but if a bank won't/can't loan money and the property taxes will not be paid for some months, municipal governments must borrow for working capital.

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