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Forget Stocks, This is the REAL Crisis That's Coming
The 2008 crash was a warm up.
Many investors think that we could never have a crash again. The 2008 melt-down was a one in 100 years episode, they think.
They are wrong.
The 2008 Crisis was a stock and investment bank crisis. But it was not THE Crisis.
THE Crisis concerns the biggest bubble in financial history: the epic Bond bubble… which as it stands is north of $100 trillion… although if you include the derivatives that trade based on bonds it’s more like $500 TRILLION.
The Fed likes to act as though it’s concerned about stocks… but the real story is in bonds. Indeed, when you look at the Fed’s actions from the perspective of the bond market, everything suddenly becomes clear.
Bonds are debt. A bond is created when a borrower borrows money from a lender. And at the top of the financial food chain are sovereign bonds like US Treasuries.
These bonds are created when someone lends the US money. Why would they do this? Because the US SPENDS more money than it TAKES IN via taxes. So it issues debt to cover its extra expenses.
This cycle continued for over 30 years until today, when the US has over $11 TRILLION in size. Because we never actually pay our debt off (or rarely do), what we do is ROLL OVER debt when it comes due, so that investors continue to receive interest payments but never actually get the money back… because the US Government doesn’t have it… because it’s still spending more money than it takes in via taxes.
This is why the Fed cut interest rates to zero and will likely do everything in its power to keep them low: even a small raise in interest rates makes all of this debt MORE expensive to pay off.
This is also why the Fed had the regulators drop accounting standards for derivatives… because if banks and financial firms had to accurately value their hundreds of trillions of derivatives trades based on bonds, investors would be terrified at the amount of leverage and the margin calls would begin.
The bond bubble is also why the Fed started its QE programs. Because by buying bonds, the Fed put a floor under Treasuries… which made investors less likely to dump bonds despite bonds offering such low rates of return.
This is also why the Fed is terrified of deflation. Deflation makes future debt payments more expensive. So the Fed prefers inflation because it means the dollars used to pay off debt down the road will be cheaper than Dollars today.
Again, when look at the Fed’s actions through the perspective of the bond market… everything becomes clear.
The only problem is that by doing all of this, the Fed has only made the bond market even BIGGER. In 2008, the bond market was $82 trillion. Today it’s over $100 trillion. And the derivatives market, of which 80%+ of all trades are based on interest rates (Treasury yields), is at $700 TRILLION.
The REAL Crisis will be when the bond bubble bursts. When this happens, it will be clear that real standards of living have been falling since the ‘70s and that sovereign nations have been papering over this through social spending and entitlements (a whopping 47% of US households receive Government benefits in some form).
Imagine what will happen to the markets when the Western welfare states finally go broke? It will make 2008 look like a picnic.
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An unregulated, unsupervised $710 trillion market under different jurisdictions lacking transparency that privatizes the profits but socializes any losses.
What could possibly go wrong?
So everybody keeps asking the (valid) question: 'When'...? In this day & age of 3-card Monty on a galactic scale, probably not until the U.S. engages the Wolfowitz doctrine to a degree that it precipitates a swift knee-capping by a couple of very large nations. And the knee-capping event happens only when those other large nations have a supply of real/honest money on hand to weather the outcome - which, it seems they have been preparing for. So there is very little the little man can do at this stage, except to 'sit tight and be right'.
Ask the Jews, they have all the answers.
The cycle is over. Energy is cheap temporarily. It is not possible with fossil fuels to gain the level of growth that would expand the economy enough to manage the debt. What is going to happen is somewhere a default will occur. A bond in the oil industry or a. Loan to a transporter or some other leveraged asset will go tits up. Then the prices for similar assets reset instantly causing balance sheet woe. Which triggers asset sales and loan calls and you can guess the rest. We are on the edge of a razor, one large oil driller default away from the collapse and we think Russia is in trouble. Lol when they print the money to try to save the next crises the fear will escalate and set off even more chaos guess phzz will be getting hammered still on the comes.
"The cycle is over."
The cycle is over when the crash occurs, allowing the next cycle to begin.
Did someone say Venezuela?
The house of saud certainly seems intent on probing that minefield with the long stick that IS the price of oil.....
Funny how derivative meltdown was the major bogie man back in '08, yet today it's hardly mentioned as the "financial weapon of mass destruction", as Buffett called it.
Somebody sure has done a bang-up job sweeping this under the rug.
Jamie Dimon is masterful. Until, of course, he finally is hung from the lamp-post.
On that day the rest of us will be lucky to still have electricity in our houses and food on the grocery shelves.
But, we'll get to toss our mortgages in the bonfire...along with the politicians that allowed this to go on and on until the world that we had known was one big suicide vest.
Yeah, and a WMD that he seems happy to trade in when it benefits his ventures and portfolio.
?? A big part of the debt is owned by the FED. The US Treasury makes interest payments to the Fed on a huge part of this debt. Those payments are then returned to the Treasury. Likewise with MBS payments the FED receives. This tempers the issues of any perceived"debt crisis" substantially.
This virtual monetizing of the US debt is supposed to hurt the US dollar("virtual" because the FED buys Treasuries in the open market after at least a slight delay from Treasury issuance). But the major competitive currencies in Japan and EU are subject to similar QE games in worse economies so the US dollar is going up.
Investors get their money back when the bonds mature. Debt is rolled over, not bonds. New bonds may be issued to repay maturing bonds, but the maturity date of existing bonds is not changed. No one is being forced buy bonds. Everyone buying bonds is doing so voluntarily. The negative interest rate policies of some Central Banks may look like forcing banks to buy government bonds, but even that is a myth. Banks don't need to park their excess reserves with the Central Bank. They can convert them to vault cash and not suffer from the NIRP.
what i want to know is rothchild, and his crew going to personlly going to collect this debt.
i thought krugman said, it just money we owe each other.
ok pheonix capital research. easy call to make. But what eludes your analysis is the big question never answered by the sky-is-falling camp
Explain HOW the bond market can/will crash, when there is no power or political will to remove the printing press? without which,
theres no reason to allow the market to crash. even when hyperinflation kicks in, it remains the task of the little people to risk violent revolution against a viscious weaponised militarized State
this revolution will not come from the oligarchs getting petty about whether their bonds are returning 1 or 5 or 10%
"Explain HOW the bond market can/will crash, when there is no power or political will to remove the printing press? without which,
theres no reason to allow the market to crash"
Math is an absolute. Math does not allow. 100% of bubbles burst and deflate. The question at hand is one of timing and what specific event will be the trigger. In 1931 it was an Austrian bank.
Will it be JP Morgan, with 70 trillion in derivatives or some foreign bank?
The G20 just made changes regarding bank bankruptcies and congress apparently is following suit, changing bankruptcy law for banks, so it is obvious something bad is coming.
The printing press is creating more debt, not eliminating debt. Printing is digging a deeper hole, not climbing us out of one. Holes dug deep enough, eventually cave in.
The G20 is preparing for the cave in.
to answer your question, read history. Are you asking the correct question(s)?
1) what government/central bank in the past currency collapses have ever "allowed" their markets/currencies to collapse?
2) with the first question, what caused the collapses of other fiat currencies in the past?
If you can answer either of these questions then you will have your answer. The big difference is that there has never been a printing on such a mass scale in known economic history going back almost 3000 years. Certainly the world reserver currency has never been abuses such as is being done now. Now we have the reserve currency, the BoJ, BoE, IMF, EUCB and arguably the Chinese/Russian Government all monetizing their debt.
No one knows for sure "when" but if people really think that this is not going to end badly then they will be caught flat footed and shame on them. this is not rocket science to see what is right in front of your nose.....
Cheers
Adding to LikeyMikey if you look at history you will discover that unbacked fiat has been tried and failed 775 times. Einstein said insanity is doing the same thing twice and expecting a different result...but 776 times with 775 currency collapses..complete idiocy!
2008 was a problem for companies.
2015 will be a problem for nations.
Good to know the year. How about the month and day?
5/1/15
If you read some history, it will not happen in a day/week/month but rather will start and take a few years to hit bottom. These things are never black and white in a day or week historically.
Liquidity will be the challenge as things deflate.
OK, so these things (market crashes, dollar crashes, et al) never have a start date. Good information.
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The 'takeway' from this really long and pedantic article:
Bonds are debt. A bond is created when a borrower borrows money from a lender.
A DEBT CRISIS, perhaps?
NO FUCKING SHIT, SHERLOCK...
'The fed'... 'The FED'... THE FED... The FUCKING FEDERAL RESERVE SYSTEM OF BANKS...the article pontificates almost endlessly about what the FED should or should NOT do. NO consideration is given as to the legitimacy of the FED as a corporeal entity in the FIRST PLACE.
NOT 'OBOLA', NOT 'GWB', NOT 'the government'... The FED did this shit. They did it to YOU and they did it to ME and they continue doing it to EVERYONE. Continually assfucking you while telling you that it's fucking 'legal' is all good and well while you are 5 years old, but when you GROW UP and see the reality, it makes you want to pull a 'Lorena Bobitt' on these assfucking bastards (cut their dicks off while they're sleeping).
A BOND is in all reality a NOTE. Trading globally is currently in FEDERAL RESERVE NOTES (for such things as OIL and the settlment of overnight loans and shit like that).
The solution is EASY (but probably too late, now). END the fucking FED.
..what bubble..? People used to buy UST, now they're not. Unless you meant Brussels, did you mean Brussels?
I guess the old crisis and the report thereon have lost their luster.
Bring on the new crisis.
And buy our report!
So, I suppose we are all wondering the same thing, can the Dow and S&P go to infinity? If each Trillion $ the Fed Bank creates pushes the Dow up by say 2,000 points, then QE4, 5 and 6 could easily give us Dow 40-50k or more, depending upon the size of each QE program compared to QE1, 2 and 3. The Fed has no limits to money creation, none at all, so they could “print” to infinity. The national debt could then go to infinity too. The Fed would also go to negative interest rates, so infinite debt would be a huge money maker for the government. The greater the debt, the more they make. The money coming from the Fed too, of course. I fail to see why this wouldn’t work, and I think it shows why the bears are suffering so much. They are thinking the Old Normal; it is no longer valid. Truly they appear to have discovered a way to create infinite wealth for all without any work involved. Other than a few keystrokes.
Many years from now, generations will wonder why the foolish people used to do work to get wealthy, and why this new method wasn’t discovered sooner? The masses will sit back in their recliners and watch the Dow go through 345,678,345,109 on its way to infinity. Amazing, get on board now…don’t wait and miss out thinking old school.
No there is no bond problem, this guy just doesn't get it either.
"The Fed has no limits to money creation, none at all, so they could “print” to infinity. The national debt could then go to infinity too."
A debt bubble cannot go to infinity.
"No there is no bond problem"
Yes there is. 100% of bubbles burst and deflate. The FED cannot violate the laws of math.
Who will build the recliners to lie back in??????
Yeah. It is different this time.
Until it is not.
Truly they appear to have discovered a way to create infinite wealth for all without any work involved. Other than a few keystrokes.
You are kidding. Or do you really believe this statement
LOL + 1,000,000,000,000,000,000,000,000,000,000,.................
Some people think there are only 3 members of Spin Tap. They are wrong.
The dollars strength and the rising American stock market could also be taken as a sign of an unstable global economy. The money flowing in from other countries in search of a safe home screams of a bigger problem! When a strong shift in currencies occurs someone gets hurt and this leads to bankruptcy and contagion.
A great deal of the shadow banking world falls into and overlaps into the grey world of derivatives. There is no single commonly adopted definition of derivative or derivative contract in the European Union. This plays havoc with what and when reporting rules apply. It also highlights divisions in how national regulators view reporting rules for the $693 trillion over-the-counter derivatives market.
Remember this is only part of a much larger market, it is estimated the total derivatives market includes hundreds of trillions of dollars in non-reported agreements and private contracts. Everyone paying attention knows that the size of the derivatives market is 20 times larger than the global economy. The article below explores some of its ins and outs of derivatives and why they could collapse the economic system.
http://brucewilds.blogspot.com/2014/03/derivatives-house-of-cards.html
John Williams-America and Dollar in Troublehttps://www.youtube.com/watch?v=j5JIDiO-f3Y&list=UUG-G8LLr38fQUNZU8K0t-E...
Published on Dec 2, 2014John Williams of ShadowStats.com says
“We are still living in the throes of the panic of 2008. What the central banks did at that time, specifically the Fed and the Treasury, was to take actions to push all the issues into the future. They didn’t do anything to solve the basic problem. The banking system is still in trouble. It is far from solvent, far from normal. You don’t have regular bank lending. If you had regular bank lending, the economy would really be much stronger. It’s not.” Williams goes on to say, “People outside the United States know America is in trouble, and they know the dollar is in trouble. It’s not going to take much to trigger a reversal of the current circumstances. It could be an unusually weak economic statistic, and believe me, those are coming.”
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Having the dollar as the world reserve currency is both a blessing and a curse. While I agree with most of what you are saying I think it is important to consider that the other three major world currencies are all in worse shape than the dollar. I contend they will fail first and bolster the dollar while they fail. In the end a new system will most likely emerge.
The world is currently engaged in a massive game of speculation and chance that contains a lot of risk. Political considerations and insider deals between both nations and Central Banks play a big roll in this game. A chart I saw recently touted how the percentage of funds held by foreign governments in dollars has fallen in recent years. Even after many countries have reduced their holdings in dollar reserves the dollar still carries a major wallop and place in the world economy and will effect everyone going forward. More on how the dollars role as the reserve currency effects all of us in the article below.
http://brucewilds.blogspot.com/2014/11/reserve-currency-status-both-blessing.html
How does that account for the $16 Trillion that the Fed gave to Europe back in 2008-2009. I believe the Tylers reported on it back around 2010.
The USD, EUR, GBP and JPY will all sink or sail together. There will be some fluctuations in value relative to each other, but valued against other currencies or commodities, they will all go up or down together.
But, of course! In fact, the new system must be in place before the current one is replaced. There are two possibilities for the one to replace the current international monetary system of USD/EUR/GBP/JPY, the IMF and the New Development Bank of BRICS. The IMF SDR would be what the West would prefer. However, it would not be politically expedient for the US to voluntarily give up (the US has a practical veto on any IMF reform) its currency's reserve currency status, in favour of something else and yet, a potential replacement has to be in place before the current system fails. So in all likelihood, the BRICS members, will agree to start conducting the intra-bloc trade in the currncy of the NDB, with some non-BRICS countries too showing interest in diversifying their foreign exchange holdings into the new currency. This will reduce the need for USD/EUR/GBP/JPY held by those countries and these currencies will all start losing their value against the new currency. It is at that time it becomes politically expedient for the US to agree to IMF reform leading to the IMF SDR acting as the reserve currency. Barring some unforeseen event, this could take a few years to complete.
well we are all freezing from being "warmed up" !
Six years and no end in sight.
A free copy? If Phoenix Capital isn't charging for this, how can it compensate for its massive losses in trading?
Well............when is it going to happen? I keep reading this crap and don't see anything changing?
So said the men of Columbus' crew as they sailed west.
And on the Eve of the great collapse. In front of the teleprompter with a slight smirk on his face. Obama will admit. We are gonna have to shortchange some folks.
Theoretically the bond bubble could burst, in reality that will likely not happen in any of our lifetimes and if it did there would be no point in having bet against the bubble as the results would be the end of finance as we know it if not the end of modern society.
in reality that will likely not happen in any of our lifetimes
Really? What makes you so sure? I'm not a bettor, but if I was I'd take you up on that one.
"Modern" societies have ended multiple times in history. And from the ashes a new one arises, bound to repeat the cycle.
Multiple reasons that I am not going into at this time because I need sleep though I will say this.
Sure there is risk to society /humanity at large but it is not in the financial sector it lies in natural events. The "market" is just a fantasy today; whatever the owners of the market want to happen they just make so with their computers and limiteless power.
Suggesting that somehow the bond market will collapse is utter nonsense which requires a total disregard for the reality we face. As this and many articles have pointed out it is probably the single most important market on earth. Why would they let that happen? They can just buy whatever they want and sell whatever they want to make the price of anything go anywhere at any time.
"Suggesting that somehow the bond market will collapse is utter nonsense which requires a total disregard for the reality we face"
The reality is that 100% of bubbles burst and deflate. Math is not utter nonsense.
Joego, Yes Tyler did a big article on 5 myths of the the US 17 trillion debt.
“We can ignore reality, but we cannot ignore the consequences of ignoring reality.”
Ayn Rand
“That which cannot go on will end.”
https://www.youtube.com/watch?v=ZZN8Ry_w4rc
Nothing like floating on an ocean of bullshit. The question is how long can the FED keep their leaky boat afloat? One good bond panic in any major country will have consequences, none of them good.
It's interesting to me that the Fed controls all interest rates, both long and short. When I took Phd level courses in Economics in the 70's I don't think it was a a given that the Fed could control the 30 year treasury rate. Right now I don't think the Fed is buying that many bonds so is a global savings glut the explanation for low interest rates?