Because of our current high rates of inflation, Inflation-protected Treasury Bonds (I-Bonds) are set to earn 7.12% interest for the next sixth months, followed by 9.62% interest the six months after that. In addition to mutual funds with Christian values, which tend to adjust to inflation in the longer-term, but, as with all mutual funds, can have big swings in the shorter term, someone who wanted a guaranteed rate of return might find these US treasury bonds attractive. I view their security as comparable to FDIC insurance. If you have confidence your money in your checking account is not going to disappear, the money in the I-bonds is not going to disappear unless the US government defaults on its debt, which is probably not going to happen in the short term, at least (and, while the high rate of inflation is terrible, it reduces the real value of our national debt, and so actually is a debt-fighting strategy–devalue the currency to devalue the debt–albeit an immoral one that repays lenders with currency worth less than what they lent out).
You can purchase up to $10,000 in I-bonds a year, per person (corporations can buy $10,000 each as well) and get up to $5,000 back on your tax return in I-bonds. Whenever you sell them, you lose the last three months of interest if you have held them for under five years–after five years you don’t lose any interest. So if inflation suddenly comes under control and their rate of return declines correspondingly (I’m not super hopeful), it would be wise to hold them for at least 15 months so you don’t lose out on the 12 months of high interest. You also can’t sell them before holding them for a year, so only tie up money you won’t need for at least a year.
I believe that churches, as charitable organizations, can also buy up to $10,000 a year, and a church school, as a separate entity, could do so as well. There may be ways for individuals to buy $10,000 worth and donate them or get refunded for them by a church that wanted to get a lot of these instead of having inflation eat up their savings account, but I have not extensively looked into this possibility (feel free to post anything useful in the comment section of this post in this regard).
You do not pay federal taxes on I bonds, but you do pay state and local taxes, I believe. (I am not a tax advisor.)
To lock in the 7.12% and 9.68% rates, you need to buy them before the end of April. So you might want to look into doing this soon. The interest rate is very attractive.
Get more information or buy I-bonds online here. I am thankful for Doctor of Credit for bringing this opportunity to my attention.
By the way, while I believe Biden is doing a terrible job, high inflation was just about inevitable after the insane increase in the money supply and crazily low rates of interest that we have had for years. If Trump had won, we would still have had high inflation right now, in all likelihood, although perhaps not quite as high, if Trump and Congress had not spent so much money this last year (by Trump not helping two Republicans lose in Georgia, flipping the Senate to the Democrats, and giving the Democrats a unified government so they could spend even more recklessly). Trump was “lucky” to lose and not be the one who gets the blame for the foolish money policy the USA has been pursuing for years.
–TDR
Christians should not call inflation a debt-fighting strategy. Reducing debt is a good and morally appropriate thing to do.
Inflation as a debt-fighting strategy is actually a creditor-defrauding strategy. People loan money to the government by purchasing government bonds. To intentionally reduce the value of the money that the government has to repay by 20% is the moral equivalent of saying, “Well, you loaned me a dollar but I’m only going to pay you 80 cents in return.”
Let’s try to use words that reflect moral reality.
There’s another moral question that this article somewhat sidesteps. To purchase these bonds is to loan money to the government. These bonds are government debt. Should Christians be loaning money to this government at all? By doing so, are we continuing to prop up / facilitate the financial con game they are playing? Are we seeking to gain financial benefit from the government engaging in immoral borrowing?
If that question has been answered satisfactorily to the individual’s conscience, then the investment case needs to be considered.
Whether the rates on these bonds are actually going to keep pace with inflation depends on whether one believes the government is using a real rate of inflation or not. If they don’t keep pace, then buying these will lose money (though perhaps not as quickly as some other investments). The rates are very attractive based on historical rates over the last 20 years or so, but whether they will be seen as attractive over the five years we are just entering (which is the only time period that matters) remains to be seen.
In buying these bonds, you are effectively buying the right to receive money from the government over a future a time period. The risk that you will not receive that money is probably quite low. The risk that the money will be worth significantly less than today’s money is quite high. You are being compensated for that risk by the interest rate. You must ask yourself how great that risk is, and whether the interest rate is sufficient to compensate you for it. In my view this is not an open and shut case, not even close.
It is certainly true that the interest rate on these will at least mitigate the impact of increasing inflation. Whether it is sufficient to ensure that the investment does not lose value remains to be seen.
It is fair to say, however, that if purchasing debt securities (bonds, savings accounts, etc), I would not today be purchasing anything except inflation-protected securities such as these, or variable/floating rate securities which will pay an increasing rate of interest as interest rates increase. I would also today not be buying corporate debt in general because I see many potential signs of significant financial upheaval in the relatively near future and I do not know which corporations will come out of that upheaval in strong enough shape to pay their debts.
Anyone purchasing any individual investment such as these bonds needs to be very sure they fully understand how they work, the risks they are taking, and how those risks fit their own personal situation. Every investment has significant risks. Even a bank savings account has a significant risk of losing much of its value through inflation.
Dear Bro Gleason,
Thanks for the comment.
I agree that inflation is unjust, a form of theft. In my articles at:
https://faithsaves.net/politics/
I believe that is clear. But I added some clarity in this post based on your comment. It would be much better for the government to reduce spending so we live within our means, but if they aren’t going to do that, another way to not default on the debt is to inflate it away, which is more probable than actually cutting spending, unfortunately, because most of the population is too economically illiterate to know what is happening.
I am not saying that buying I bonds is the greatest investment ever for all people at all times. But they are better than getting 0.1% in a savings account for 15 months. That was my main point. I wanted people to know about the option before the end of the month.
Thanks.
Thank you for clarifying the debt fighting point, much better.
I do agree that these are obviously better than a typical savings account, if one is satisfied that loaning money to this government is morally/ethically appropriate. That is a question which I don’t think Scripture clearly dictates to us, so is probably best seen as a matter of personal conscience.
Just to illustrate how it is useful for the government to steal by inflation when it has such a huge debt, if we have 10% inflation in one year, the “real” value of our 30 trillion national debt has been reduced by 3 trillion dollars. We aren’t going to cut spending to balance the budget and then actually pay down our debt by three trillion dollars beyond that–it just isn’t going to happen. Even balancing the budget isn’t going to happen. But here is a way to reduce the real value of the debt by devaluing the currency. It is very attractive the larger the debt it, the more profligate the government is, the more economically ignorant people are, and the more they are themselves careless about paying back what they owe and so don’t care if the government does it either.
Even the Fed’s “target” rate of 2% inflation a year reduces the real value of the national debt by 600 billion dollars a year. Extremely convenient, as long as you don’t mind defrauding the people who borrowed from you.