2021: Is float worthwhile when you can borrow in the bond market at a negative interest rate?

BECKY QUICK: On a related question, Elle Kandel wrote in on this, too, and said, if you can borrow money at a guaranteed lower even zero interest rate, is it still worthy of borrowing money for not that guaranteed cost from the insurance operation.

WARREN BUFFETT: It reduces the value of float by a substantial amount. And we have a flexibility with our float that virtually no one has, and I’ve written about this in the annual letter. But the value of float has gone down dramatically because everything is off of interest rates. And when you get to negative interest rates, if a country can borrow at negative interest rates, you get into something, that’s kind of akin to the St. Petersburg Paradox. And those of you who want to go to Search you can find some interesting things on it, but it becomes infinite. And it’s a crazy consequence of a bunch of abstract mathematics where you get there.

But, you lose gravity entirely, and if you tell me that I’m going to have to lend money to the government at minus 2% a year, and I’m talking nominal figures, not… You’re just telling me how I’ll go broke over time, if I do that. So it pushes you to do other things, and of course we’ve seen it. Well, we saw the rest of the world do it in even more extreme fashion, but nobody… Paul Samuelson, brilliant man, nobody, nobody thought he could do this. And we don’t really know what the consequences are, but we know there are consequences, obviously.