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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.
If you’ve yet to take action to prepare for the second round of the financial crisis, we offer a FREE investment report Financial Crisis "Round Two" Survival Guide that outlines easy, simple to follow strategies you can use to not only protect your portfolio from a market downturn, but actually produce profits.
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http://www.phoenixcapitalmarketing.com/roundtwo.html
Best Regards
Phoenix Capital Research
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FLASH...ESSENTIALLY YES..FOFOA JUST DID A PIECE ON THIS...LONGISH but thorough..
http://fofoa.blogspot.com/2014/12/global-stagnation.html
Truly.
"As a consequence of all of that deficit spending, our cumulative checking accounts (basically the money supply aggregate that should affect consumer prices) grew by 900%, and our monetary base grew by 2,000% while cumulative consumer price inflation was only 130%. If this seems to violate what you thought you understood about the causes of inflation, you are not alone. "
or as the Tyler of 5 years ago would put it, the 'transmission mechanism is broken'
You saying that Tyler blew a trannie five years ago?
Borrow for 0% to get the .25% flip back.....sounds legit!
I think what you describe was a goal of the Fed to help the big banks be more solvent. To continue with my earlier thought it was obvious in the 70's that the Fed didn't control the long rates. Long bonds had huge inflation premiums in them then and everyone was hollaring that it was bad that interest rates were so high. How did we go from that to the Fed printing a ton of money, controlling long and short rates, and no obvious inflation?
Where does the flip back come from? $3.5T was sequestered as excess reserves. That is a wall of currency waiting to burst forth. As for the rest, it was put into very few large pockets. The markets around those pockets have exploded (luxury everything is going crazy). Word is they prefer real property, fine art, fast cars, loose women, 400oz gold bars, and mountains of coke. It will take a while for that currency to be dispersed amongst the rest of us as we do not have much of any of those things to sell.
Edit: And as gamma said, a lot was exported since, well, we can.
From what I understand is that we have exported that inflation. When the dollar bubble pops, and all those US$ come flooding back because no one wants that useless paper, inflation will spike.
Must, hold, balloon, under, water...... OOOPS losing grip.
Wasn't there another article here yesterday that was long bonds?
dongs, it was long 'dongs' and it wasn't this site. You still seeing the ads for Asian hookers on the side of these pages?
Long Dong Silver.
I heard of him....
So did Clarence Thomas.
http://news.yahoo.com/blogs/upshot/ex-girlfriend-dishes-dirt-clarence-thomas.html
I heard he was dead.
(or was that Snake Plisskin?)
I don't know....did you buy some? Personally I wouldn't touch any of this shitshow with Corzines dick!
That metaphor was totally uncalled for. You just deprived me of a decent night's sleep.
The ideation of fondling some REAL PHYSICAL versus watching a two-dimentional paper-printed magazine that shows off John Corzine raking in 'Silver Shorts' (as described by Max Keiser long ago) SHOULD keep you up at night.
http://www.chelseasofnewyork.com/v/vspfiles/assets/images/sh2965_sexy-sh...
"I reach out to the computer screen and see the 'numbers', and want to touch them, caressing them delicately and showing how much I love them, but all I feel is a cold and electrified plastic which is flat and unyeilding to my emotions. Digital numbers in the account on the 'plus' side don't make up for the lack of the feel of the physical contact of a lover who returns the favor..."
If this describes YOU, press the 'upvote' button.
If this DOES NOT describe you, you are obviously lying. Press the 'UPVOTE' button anyway.
I'm an accountant. Numbers are my wet dream.
No vote...nullified by your rules.