This page has been archived and commenting is disabled.
Guest Post: What Do Interest Rates Tell Us About The Economy
Submitted by Lance Roberts of Street Talk Live,
Last week I discussed the disconnect between the markets and the economy stating that:
"Since Jan 1st of 2009, through the end of March, the stock market has risen by an astounding 67.8%. However, if we measure from the March 9, 2009 lows, the percentage gain doubles to 132% in just 48 months. With such a large gain in the financial markets we should see a commensurate indication of economic growth - right?
The reality is that after 4-Q.E. programs, a maturity extension program, bailouts of TARP, TGLP, TGLF, etc., HAMP, HARP, direct bailouts of Bear Stearns, AIG, GM, bank supports, etc., all of which total to more than $30 Trillion and counting, the economy has grown by a whopping $954.5 billion since the beginning of 2009. This equates to a whopping 7.5% growth during the same time period as the market surges by more than 100%."
The reality is that the economy has been growing very weakly since the end of the last recession. The post-1980 norms of 5% annual growth has remained an elusive target despite the Fed's continued monetary interventions. As stated above, since the end of the last recession, the economy has grown at roughly 1.7% annually despite trillions of dollars of injections which have boosted Wall Street but has done little for Main Street. The chart below shows the decline in "nominal" GDP growth since 1962.
What is important to note is that GDP was, on average, expanding prior to 1980. However, since 1980, and there are many reasons for this, economic growth has been contracting. I addressed this specific issue in "Debt And Deficits - Killing Economic Prosperity" wherein I stated:
"From the 1950's through the late 1970's interest rates were in a generally rising trend with the Federal Funds rate at 0.8% in 1954 and rising to its peak of 19.1% in 1981. Of course, during this time the U.S. was the manufacturing and production powerhouse of the entire global economy post the wide spread devastation of Europe, Germany and Japan during WWII. The rebuilding of Europe and Japan, combined with the years of pent up demand for goods domestically, led to a strongly growing economy and increased personal savings.
However, beginning in 1980 the world changed. The development of communications shrank the global marketplace while the rise of technology allowed the U.S. to embark upon a massive shift to export manufacturing to the lowest cost provider in order to import cheaper goods. The deregulation of the financial industry led to new innovations in financial engineering, easy money and wealth creation through the use of leverage which led to a financial boom unlike any seen in history. The 80-90's was a period of unrivaled prosperity and the envy of every nation on earth.
Unfortunately - it was the greatest economic illusion ever witnessed.
The reality is that the majority of the aggregate growth in the economy was financed by deficit spending, credit creation and a reduction in savings. In turn this reduced productive investment in the economy and the output of the economy slowed. As the economy slowed, and wages fell, the consumer was forced to take on more leverage to maintain their standard of living which in turn decreased savings. As a result of the increased leverage more of their income was needed to service the debt, and with that, the 'debt cancer' engulfed the system."
The chart below shows the 10-year treasury rate and the Fed Funds rate overlaid against each other. You can clearly see the change from the generally rising trend in interest rates prior to 1980 versus the steady decline ever since.
What is important to note is that since 1980 each time interest rates have tried to rise, along with increases in the Fed Funds rate, the economy was eventually pushed into a recession and rates then declined. During economic expansions interest rates increased but to levels that were lower than the previous peak. Conversely rates have continually pushed to new lows after each previous peak.
If we put these two charts together we can see that interest rates can tell us much about the overall direction and strength of the economy.
Despite the mainstream analysts' calls for a "great rotation" by investors from bonds to stocks - the reality has been quite the opposite. While the 10-year treasury rate rose from the recessionary lows signaling some economic recovery in 2009, as I discussed in "Economy In Pictures," the decline in rates coincide with the evident peak in economic growth for the current cycle that begin in earnest in 2012.
"With rates plunging in recent weeks the indictment from the bond market concurs with the longer term data that the economy remains at risk."
Despite the calls for the end of the "bond bubble" the current decline in interest rates are suggesting that the real risk is to the economy. The aggressive monetary intervention programs by the Federal Reserve, along with the ECB and BOJ, continue to support the financial markets but are gaining little traction within the real economy.
However, despite the Fed's jawboning that they are targeting specific levels of employment and inflation rates to begin to unwind current monetary policy, the reality is that the Fed, along with everyone else, is trapped. For the Fed, rising interest rates are the enemy - not the solution. Higher rates of interest will further impede economic growth by raising borrowing costs, the housing recovery would grind to a halt as higher mortgage rates reduce purchases and freeze the re-fi markets, unemployment would rise as demand falls and the financial markets would decline as higher rates reduce profitability. Of course, each time the Fed has tried to withdraw monetary support programs in 2010 and 2011 - the economy immediately hit the skids. Of course, this is likely why the current quantitative easing program is "open-ended" because the Fed has finally realized that there is no escape. The next economic crisis is coming - the only questions are "when" and "what causes it?" The problem is that next time - monetary policy might not save investors.
»
- 14059 reads
- Printer-friendly version
- Send to friend
- advertisements -
ZIRP!
Zero per cent!
Nothing.
Fuck you, Bernanke.
Is this a trick question?
"What Do Interest Rates Tell Us About The Economy?"
It tells me that I get NOTHING for saving, and that the bankstas can do all kind of wreckless shit!
Another meaningless guest post
What do Slurpee sizes tell us about hydration?
Well, not sure about sizes and hydration. What i do know is that when I drink a cherry slurpee, my wife enjoys the flavor of the later hydration.....not sure how it changes the flavor though. But don't really care either........
what will we see first: a bond vigilante or a unicorn?
What does the shearing tell us about the Sheeple?
a much more worthy post....
"The U.S. stock market indexes have been juiced up to record highs. The Fed has publicly stated that they were promoting the so-called “wealth effect”. We now have to consider that it was a ruse to deflect from the real objective. The goal was not to get individuals back into stocks. The real targets were the institutions and the massive amount of money they control.
If you are a large institutional manager, you really only have two asset classes from which to choose, equities and fixed income. Given that the rates on fixed income were virtually non-existent unless one sacrifices quality constraints, the only class left was equities. Institutional managers had to heavily invest once the indexes started moving up last Fall. Most managed money is overtly or covertly indexed. Therefore, when the indexes started rising, the institutions had to buy, and it worked. Now that the official line is that stocks are overvalued, the compulsion this time for institutional managers is to revert back to cash.
So let’s try tying these events together to come up with a possible scenario. The Central Banks have used every tool in their playbook. They printed money. They bought up the toxic debt. They dropped interest rates to zero. They drove up the popular stock indexes. They have vigorously repressed gold and silver prices, perhaps oil, too.
It is not working now. The economic statistics are rolling over. Employment, inflation, manufacturing activity and other indicators of the health of global economies are showing signs of instability and outright decline.
So what do you do if you are trying to control this mess?"
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/4/8_Chaos%2C_Cyprus%2C_Manipulation_%26_How_To_Protect_Your_Money.html
Thanks for the post. Seems like the Central Banks are herding everyone into US Treasuries (and at the same time allowing China, Japan, et al. to get out of US Treasuries) before they sink the ship. The power structure will survive as they have been buying real currency (gold) hand over fist. Unfortunately, the same folks that created this mess will be the only ones left standing to begin the new mess. Hopefully I'm wrong!!!
So why are equities soaring again?
$85 billion/month of Benny Bux for commercial banks to leverage 40X and juice equities. Classic MOPE. Also, Japan escalation of $$ printing accelerates currency wars and other CBs will likely pick up the pace as well in a race to debase...
I found this post very interesting, but I would like to have seen an inflation line on that graph
Quantitive easing: https://www.youtube.com/watch?v=KRTdeYHoQgg
What Do Interest Rates Tell Us About The EconomyNothing because they are artificial rates and have no bearing on reality! Same for equities and Gold and Silver, they are all part of a concerted effort to fake everyone out! How's it feel to be a pawn in a government that was designed to be by and for the people?
Exactly. That's all TPTB can do....paint pictures.....divert attention....look over rthere....there's nothing wrong with the economy.....we can borrow at record low interest rates.....stock market all time highs.....no inflation......falling unemployment.......house prices rising......
We are royally fucked?
This a trick fucking question then?
If you had an interest rate apple with a straw n you poked the apple though wit itand a pebble hadnt dropped through itd stop straw inside the appleebcause gravity cant apple.
It's that easy.
Without interest rates at historical and somewhat normal levels, we will never see any economic recovery.
Interest rates have nothing to do with risk. They are an indicator of how much profit is available to be extracted by the financial system. ZIRP is proof that we have hit the growth ceiling of the planet.
We have hit the growth ceiling of the present monetary system
Its a tellin' me the economy stinks, the risk of a nightmare financial scenario is humongoliod (that there will be an even Bigger rush to safety) that we are in a Liquidity Trap due to a Credibility Trap (legal, ethical and moral causation) and for anybody harboring any doubts. yes, the bond market is a far better discounter of future events, has been so for ages, let alone the New Equity Manipulations of Late.
Its telling us that the doctrinaire of the CNBS and equity manager types is dead wrong. That hell fire and brimstone are coming (figuratively) and people are more interested in return of their money than on their money.
The only truth is price
And yes, there is a dearth of bonds because the Fed is monetizing the debt. Which when stopped (if ever) will have some additional bad shit consequences.
Why is it our leaders seem to act a bunch of mixed race bastard unwanted demented children trying to escape from a locked cell with a power drain snake for recess?
Idiot bastard children. Zappa called this one early too.
there is no truth in the price of bond yields..they are manipulated by the Fed, owned by Federal Agencies and passive central banks.
the amount of Treasuries "in the market" is tiny compared to the amount on issue.
top left here national debt is 16.8 trillion..http://www.usdebtclock.org/ (107% of GDP), leave aside the actual laibilities not yet brough on to the national debt balance sheet over the next thirty years and the fraudie and funny debt of another what 6 trillion? let's just look at the treasury market.
of this 16.8 trillion, 4.8 trillion is held by other government bodies (here: http://www.treasurydirect.gov/govt/reports/pd/mspd/2012/opds122012.pdf) leaving 12 trillion.
the fed owns 1.8 trillion here: http://www.newyorkfed.org/markets/soma/sysopen_accholdings.html, it is this 1.8 trillion that has forced yields down on the other 10.2 trillion..because only a small part of that 10.2 trillion is actually traded in the market place.. 1.8 trillion represents a significant proportion of treasuries "in the market"
from tic data here: http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt foreigners (mostly central banks and monetary authorities) that are all part of the fiat world currency system) own 5 trillion..this has varying degrees of liquidity but mostly only one fifth of their holdings are traded (sufficient to gernerate some alpha)...notice how stable the holdings are..these are passive (sticky) investments.
5 trillion out of twelve trillion leaves 7 trillion "in the market"..if you drill down even further, a lot of this 7 trillion is passively held to match pension fund liabilities and as reserves for insurance companies and as risk weighted assets by banks.
so..of the 7 trillion "in the market" is actually al ot lower than this and it is in this way that (using its 1.8 trillion out of what? 4 trillon in floating treasury market liqudidity? the Fed has bought a little under half of all "available" bonds. this is the scale of the debt monetization engaged in.
the Fed will have models and will make phone calls/complete surveys to find out how "sticky" treasury holders are.
if you believe my assertion that nominal GDP should = US treasury ten year nominal yield and nominal GDP is around 3-4%, it takes 1.8 trillion to manipulate ten year bond yields down by c. 2%. (hedge funds now have a market squuezing ratio to work with, to go short or long for a full 1% of yield in individual holdings or the entire market, I wonder if they will pay me...NOT!!! heh).
PS
china owns 1.3 trillion of treasuries, only slowly growing since china has no other place to put US trade surpluses and is pleased that Paulson swapped their fraudie and funny holdings for treasuries at the time of the fraud in the mortgage market that was discovered after the GFC.
japan owns 1.0 trillion, god knows why..i guess if they devalue their currency by 20% they can meet fiscal deficits this year.
Guess what folks? Dow Jones is closing in on a new record high.
Shit labor reports are bullish.
Alcoa's shit fucking quarter is bullish - only 28 days of operating income left in their bank - bullish. Borrowing ZIRP cash now replaces revenue used to buy up shares to keep them up.
Government confiscation of citizens' cash is bullish.
48M Americans on food stamps - well that's fucking bullish too.
So what's this about fucking interest rates? What are those?
Capital flows and liquidity trump fundamentals and technicals.There is at least $32 Trillion sitting in offshore tax heavens. There is likely upwards of $200 Trillion sloshing around the globe.
The biggest lie is that even if one were to tax the rich 100% that wouldn't make a difference? If you tax the rich 100%, you are going to eliminate ALL the DEBTS? This is a basic financial concept ASSETS=DEBT+NET WORTH.
According to propagandist who own all the media sources including blogosphere, stealing from the rich makes you a Communist, but stealing Social Security from the citizens makes you fiscally prudent conservative?
if the rich got rich fair and square (no government intervention/pork barrel subsidies/tax evasion) then its their money...otherwise either rich or poor..ITS NOT THEIR MONEY!!!
China's collective wealth rises on the basis of low wages and low regulatory control, and to counteract that shift western countries raise wage rates and increase regulatory control. More government control, more "protection", equals less wealth. That's the stupidity of our rotation into collectivism while China rotates out.
Collective wealth, rivers of bacon, and air you can walk on.
The Road to Perdition is the only market signal worth listening to.
Interest rates are tied to demographics and not the economy. Factm.
Asset value is measured in a lot of different ways, like risk, liquidity, and income. Pretty soon, it won't be measured in cash price. Maybe it'll be measured in how many chickens or eggs you can get, or gold coins. There is not a one-to-one relation with economic activity and interest rates when every company is awash in cash.
Funny how the now-despised system of unfair capitalism was so much better at driving buying power down to the everyman level than the market-by-mandate system. Fairness turns out not to be so fair.
But, when it all blows up can we still watch "Dancing with the stars"?
Interest rates at 60 year lows are telling us an economy based on debt sucks! EOM.
Shhhh. CNBS is talking about the woes of JC Penny. Pay no attention to the man behind the curtain.
BTW - If gold is down $5, they talk about it all day long, but it it is up on the day nothing. Who controls these tele-prompters? The man behind the curtain?
heh..saw a bit of that..and lots of shots of a talking head standing at pit 10 waiting for herbalife to open!
i guess its the equivalent of the kardashians for the boys and girls
First they came for the US manufacturing base and America’s company pensions, then they came for the US taxpayer treasury for Fed bailouts, then they came for people’s houses, then they came for savings accounts, and now they are coming for Medicare and Social Security…
America was founded upon individual responsiblity and those are exactly the people being targeted by the banking cartel.
And, at the same time Obama is fulfilling his pre-election promise in 2006 to Goldmanite Robert Rubin to cut Social Security and Medicare (it includes a means testing for recipients), his FY13 budget proposal increases means-tested welfare programs an additional 30 percent. Never mind that this program, 95 percent of which is medical assistance, cash assistance, food assistance, and social / housing assistance, already was the single largest 2011 budget expenditure - more than the nation spends on Social Security, Medicare or national defense.
Andre Damon in his article “Obama defends plan to cut Medicare and Social Security,” reprinted today on Global Research, writes:
“White House officials indicated in a press conference last week that the budget proposal will include $1.2 trillion in spending cuts over ten years, including $400 billion in cuts to Medicare and other health care programs and $130 billion from reducing inflation calculations linked to Social Security payments.
In the course of discussions over the “fiscal cliff” earlier this year, the administration publicly released a proposal that includes many other cuts—such as $35 billion in the “reform” of federal retirement programs, the ending of Saturday delivery for the US postal service, and increased fees for airline travel.”
Says Damon: “The Medicare cuts will reportedly include means testing for recipients—a move that would transform it from a universal entitlement to an antipoverty program, in preparation for its gutting and ultimate destruction—and a cigarette tax, a regressive consumption tax. The means testing proposal in particular marks a sharp escalation in the attack on Medicare.”
http://www.globalresearch.ca/obama-defends-plan-to-cut-medicare-and-social-security/5330597
still wont be enough...ten year deficits = 16 trillion..these cuts? 1.2 trillion? nowhere near enough
Those old cya sayings from financial days gone by are no longer:
"No one one can predict the stock market..."
"I don't have a crystal ball." And others, are alll gone. Now, many can not only predict, but KNOW with certainty, the only correct course of action. Buy right now, this very second, and enjoy the f-ing ramp. Risk level is near zero. The ONLY risk is if we are on a down of the down/up. We live in a no risk trade world, it might be said, and that the stock market is the new Certificate of Deposit.
A can't-lose stock market. But for how long? "it all works until it doesn't" and that clap-trap talk is wrong. This market will go up, ramped, forever. 2017 and on, "but, but Alcoa went bankrupt" ramp. "22% participation rate." ramp. "ONLY politicians have jobs." ramp. "not one Dow co. made a profit" ramp. "93% food stamps." ramp. "but... but..." ramp. "apocaly..." ramp. "earth doesn't exi..." ramp.
RAMP EVERYTHING FOREVER. The All New Normal.
Now excuse me while I go buy me an S&P CD, with a side of DJIA money market.
Literally millions of people living in zero down houses, driving zero down cars, handed $100k zero down college loans, getting 'free' food, 'free' health care and 'free' cell phones wiht maxed out credit cards.
What could possibly go wrong?
thats becuase moms and dads want it to be that way...thats why obama got elected when he said "yes we can"
Today, on LewRocKwell: Jim Rogers: 'I Suspect They’ll Take the Pension Plans Next; I for One am Worried, and I'm Taking Preparations' by Tekoa Da Silva
I was able to reconnect for an interview with legendary Quantum Fund manager and commodities bull, Jim Rogers. This was an especially groundbreaking interview, as Jim shared thoughts on what governments around the world will be taking next, and what he’s doing right now to protect his personal bank accounts following the Cyprus collapse.
Speaking towards the frightening implications of the Cyprus banking collapse, Jim said that, “It’s been condoned [now] by the IMF, the European union, and everybody else in sight; that a government in need, can take assets. We all knew they could tax us…but this is the first time that I’m aware of, that they’ve gone in and taken bank accounts. They took gold from people in the U.S. in the 1930?s…but I’ve never heard of them taking bank accounts. [Now] they’re doing it. So be careful [because], now they can take your bank account under this precedent.“
When asked if bank account confiscation will be going worldwide, Jim said, ”Well, it’s now in their bag of tricks, but yes, they can do anything they want too now. I for one am worried and I’m taking preparations. Who knows if I’m right or not, but I’d rather be safe than sorry as all of those people who had money in Cyprus have learned. They thought they had a normal bank account… but now it’s been [taken] with the sanctions of many governments and institutions.”
Jim also urged that, “If people have money in any account, anywhere in the world…cut it down to under the guaranteed amount. They might take that too someday when things get desperate, because the precedent has been set, but that’s where I would start if I had money in the bank anywhere in the world.”
With respect to which assets governments will likely be coming for next, Jim said, ”401k plans, IRA’s, and pensions plans which the government knows about [may be next]…They’re rationale would be, ‘Well most people haven’t been doing well in their IRAs and pension plans for the past several years, so we’re going to help you. We’re going to take your pension plan and give you government bonds so that you have a guaranteed return.”
Jim further added that, ”That’s how they’ll rationalize taking our money. They know where all the pension plans are because we have to report it, so they’re easily accessible by governments. They know where they are, what they are, and they’ll be able to snatch them away. Who knows what they’ll do, but they’ll certainly find some way to take our money when things get worse, they always have.”
As a final chilling comment to end the interview, Jim noted that, “Anything they know about—they might easily take.”
This was another powerful interview, conducted with an absolute legend of our time. It is required listening for serious investors and market students.
Interview with Jim Rogers (MP3)
And krytonite kills Superman... Mr. Roberts, here is a research project for you. Take the current monthly deficit spending. Add that deficit to the national debt. Calculate the current interest expense to the US Treasury using current rates. Column two Maintain current Treasury Income. Run 5 year and 10 year projections. Spreadsheet 2. Add 1% to the current interest rates and run 5 year and 10 year projections. Spreadsheet 3. Add 2% to the currnet interest rate and run 5 year and 10 year projections.
Line Graph all three. Overlay current Treasury Income. When do the lines intersect? The point where interest expense exceeds Treasury income. In other words, all the income taken in my our wonderful federal government will be required to service the debt. The first sign that things are falling apart will be when Washington reduces funding to state and local governments which is currently around 25%. Americans can't handle a paltry $85B sequester. What happens when people realize that we've been defying gravity for the past 10 years and it's time to come back to earth? Write an article on your results Mr. Roberts and I assure you that you will gain an audience.
you could put it this way...if government insolvency occurs when the cost of servicing debt bigger than taxes
the first order level os insolvency occurs at a very high interest rate/bond yield
2.5tn in taxes/16tn in debt = 15.6%, miles away huh?
this is only half the picture...spending is 3.5 trillion...of which only 20% is "discretionary", the rest is promised to beneficiaries, that is only 700 billion can be cut.
in other words non-discretionary (benefit) spending is equiavlent to AN ANNUAL INTEREST COST.
so the taxes of 2.5 trillion have to be set off against 2.8 trillion of non-discretioary spending PLUS interest.
it can be seen that any level of interest/bond yields is unsustainable, hence the Fed has to maintain ZIRP, to slow the car crash.
I can't wait till this USTreasury market blows up. I want to see the faces of all those idiots on CNBC, FOX etc. as they try to explain what's going on. It ought to be priceless.
The only thing that I don't understand is why so many should-be informed intelligent folks on this site don't seem to get IT....TPTB are not working the interest rate/money printing GAME for any good reason...at least, not good for you and me....it's for POWER over us....THEY are not with us...THEY are agin' us...lol...They are getting the masses on the teet of government(SNAP cards,etc...), THEY are going to get your guns away from you one way or the other, THEY are going to impose the rest of the NWO(did ya hear Biden the other day) on the 99%, and you simple-minded pitiful sheep are going to the slaughter...like it or not...and just as Soros led his fellow Jews to the chambers, someone near you will point you out to THEM...'cause like Soros said on live TV,"If I didn't do it someone else would have!"...do I make my point, sheeple? Is anyone out there listening....if ya' wait until it's too late to defeat them, what does that make you???????????????Yes, you do in fact know that answer, now don't you!
Can we all please focus on the big picture? - That, economies have been rendered almost meaningless by the control exerted by Financial Entities whether they be Central Banks, Governments and other Financial assets managers of (money/electronic digits,) either newly minted (printed,) or "saved/transferred (old money,) since the late 19th century, to non profit Foundations /Think Tanks, Individuals/families and International Banking Interests.
This is the money hiding in offshore tax free jurisdictions, hedge funds, pension trusts, etc. Since this real wealth is mostly represented by electronic digits (under our new financial rules,) markets can no longer be left to their "economic whims." By a perverse set of new financial values, the fickle nature of markets must be controlled. Natural Capitalist Markets (economies,) are therefore the enemies of those that must exersize financial control. The controlling interests are behaving as if the real economy no longer matters, aa long as the controlled levetation of International financial markets is accomplished well.
The big picture is this...THEY are making their final push for total control of the planet...there are several reasons that NOW it is imperative to take control very soon...for another day...but if the informed don't act soon, it will forever be too late...the military is being cleansed of opposition of any sort...certain people are being elliminated...the so-called markets are being set up and THEIR positions are being taken....while your money has been used to set up these positions...when the time is ripest to fleese the most, it will all come down....and because so few will be in a position to resist...the drones and the apparatchiks will do their dirty work....jmho
without central bank levitation interest rates would probably be around 5% and the stock market around half it's current value and climbing guided by reality. instead, the market will crash and burn when the levitation trick ends or confdence in the levitation trick ends.
The World Wide Sovereign Bond bubble: Coming to a Stock Market near you
*In Financial Theaters 2015*
Perhaps a concern investors should have across all debt markets is the shape of the yield curve in relation to the Global QE being employed by the Central Banks. QE has not worked so far, so let's keep repeating the same mistake over and over again. QE does drive up the price of essentials, but one cannot print jobs. The perception in the world debt markets may not be a fear of inflation as it is commonly understood, but fear of continued devalued currencies hoping to stimulate / revive a bad business model that has not been allowed to fail. The FIRE (Finance, Insurance, and Real Estate) economy of the last 40 years as exacted its final pound of flesh in creating a debt burden on society that can never be repaid. The FIRE economy made anyone in the industry very rich by perpetuating the myth to civilized man through manipulation, advertising, and media that they had to have more, and could purchase more on credit. For we could always pay debts back with a good job. Now the world is faced with no consumer growth prospects, or the desire to have the big McMansion on the block. Everyone is over leveraged, cash poor, and nowhere to invest their saving with a decent return thanks to QE. But if the Central Banks continue on their current course, then the citizens of the world will most assuredly exit any debt but short term debt, knowing that long duration means a much devalued return. The risk to the markets may be a run to very short maturities and a whole sale liquidation of long date maturities. Does one really believe the Japanese are going to stay in any semblance of the Yen if the BOJ is going to devalue the currency aggressively further? Or are the Europeans going to stay in the Euro knowing that any deposit over 100,000 euros can be confiscated. There is a very really risk of a run on the Yen and a huge liquidation of long debt.