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The Beginning of the End of the $100 TRILLION Bond Bubble
The big story in the world is the bond bubble.
For over 30 years, sovereign nations, particularly in the West have been buying votes by offering social payments in the form of welfare, Medicare, social security, and the like.
The ridiculousness of this should not be lost on anyone. Politicians, in order to be elected, promise to allocate taxpayer funds on social programs that will benefit said taxpayers down the road (we’re simply talking about social spending, not infrastructure or other costs.
The concept that taxpayers might simply just keep the money to begin with never enters the equation. And because everyone believes that they are somehow spending someone else’s money, they play along.
When you believe that you are spending someone else’s money, it’s very easy to write a blank check, which is precisely what Western nations have been doing for years, promising everyone a safe and secure retirement without ever bothering to see where the money would come from.
When actual bills came due to fund this stuff, Governments quickly discovered that current tax revenues couldn’t cover it… so they issued sovereign debt to make up the difference.
And so the bond bubble was created.
The large banks, that have a monopoly on managing sovereign debt auctions, were only too happy to play along with this. The reasons are as follows:
- They can use these alleged “risk-free” assets as collateral to backstop tens of trillions worth of derivatives trades. A $1 million investment in your typical US Treasury can backstop over $15 million worth of derivatives if not more. The profits from the derivatives markets remains a primary source of revenue for the banks.
- Sovereign Governments are only too happy to bail out the big banks if the stuff ever hits the fan on the trades that are backstopped by the sovereign debt (see 2006 onwards). Since the banks are the ones holding the sovereign debt, they can always threaten to dump bonds, which would render the whole social welfare Ponzi bankrupt (see what happened in Europe when sovereign bonds collapsed in 2011-2012).
- In a debt-based financial system such as the current one, sovereign bonds are the senior most assets in the system. Those who own these in bulk are at the top of the financial food chain in terms of financial, economic, and political clout.
Since it was rarely if ever a problem to issue sovereign debt, Governments kept promising future payments that they didn’t have until we reach today: the point at which most Western nations are sporting Debt to GDP ratios well north of 300% when you consider unfunded liabilities (the social spending programs mentioned earlier).
Now, cutting social spending is usually considered political suicide (after all, the voters put you in office in the first place based on you promising to pay them welfare payments down the road). So rather than default on the social contract made with voters, the political class will simply push to issue MORE debt to finance old debt that is coming due.
The US did precisely this in the fourth quarter of 2014, issuing over $1 trillion in new debt simply to pay back old debt that was coming due.
This is how the bond market becomes a bubble. Between 2000 and today, the global bond market has nearly TRIPLED in size. Today, it’s north of $100 trillion in size. And it’s backstopping over $555 trillion in derivatives trades.
There is literally no easy fix to any of this. The pain will be severe. And so everyone in charge of the important decisions (the political elite, the big banks, and the Central Banks) will push this as far as it can possibly go before taking the inevitable hit.
The fact that Central banks are now openly cutting interest rates to NEGATIVE should tell you how far along we are in terms of funding problems (at these rates, bond holders are PAYING the Government for the right to own bonds). From a baseball analogy we’re in the late 8th, possibly early 9th inning. When the game ends, the entire mess will collapse. And it will make 2008 look like a joke.
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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Best Regards
Phoenix Capital Research
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what a douchebag (lol) dont you realize that all 'welfare' money ends up in the hands of the banks and the elite eventually? God, get a GED or an IQ above 75 and THEN come post here FFS or go RENT a clue;
IF you dont yet know (or are clueless) that the Republicans have voted the make the taxpayer the sole guarantor of $500 Trillion in Wall Street junk derivatives, then you dont even have the right to an opinion here.
i swear some people are so gawddamn dumb that they should not even be allowed to exist
Reading these comments, people sure have a ton of faith in governments, printing presses, and C.B.'s.
Isn't that what every failed society in history got wrong too? Where are they now with their "fail proof" system?
this will never happen. The likely outcome is long term deflation, lower prices, debt value increase in real terms. The growth will be in emerging markets with no debt
LOL a default on their watch is about the last thing that will we see happening in this charade. The house is burning down around us, but hey - as long as they got a finger on that treasury bid it's all in good hands!!
The nominal price of the bonds will never collapse. Our masters of the universe have alredy demonstrated that keeping the global sovereign debt market ahead of the credit deleveraging undertow is priority #1. Deafult and G8 soverign bond do not go in the same sentenct together. Now the currency used to buy them...
Wife, daughter and writer of controversial FEMA camp movie ‘Gray State’ dead in ‘murder-suicide’
fucking sick bastards that run things love to meet the group who 'suicided' them and waterboard them to death
No depth on the deaths on Mpls news
No depth on the deaths on Mpls news
Don't forget that these bonds are never really paid off, they are merely rolled over into new debt. Our government is using prostitutes (elected) to investigate the whorehouse (Wall st) so this will not end well.
So if you get the pimps, you are done?
Not to be a dick about it, but you (i.e. the middle class) are the prostitute, congress is the whorehouse, and Wall St. your Macareau (you also pay protection to the Tong for safe operation).
We are all prostitutes as we "sell" ourselves every God damned day. The government is the pimp because they lay claim to a percentage of our earnings, claiming it is payment for protection, when in reality it is payment for protection from them, as they constitute the greatest threat. And if we refuse, or claim our independence, retribution is swift and meant as an example to the others of the consequences of our choice.
Eventually, over time, they all swirl around so they have all held seats of power within each of major institutions.
It is well established.
Speak for yourself
Your making some asuumptions about class and involvement in the market......
Bullshit!!! The Oligarchs have heaped at least $23 trillion of private debt on public balance sheets since 2008 and Phoenix Capital Research is blaming Social Security, Medicare and welfare for the bond bubble. Not only are taxpayers on the hook for these trillions of private debt, they must also take cuts in their social services. Their money doesn't belong to them.
My god! You can't make this shit up.
While you are correct about the horrendous private debt piled onto the public tab, that is a rounding error compared to the $100 - $200 trillion in unfunded liabilities promised to you and me in the form of medicare, social security, and pensions. The sad truth is, we are not paying anywhere near enough to cover our own golden years... and we never have.
In fact, no one anywhere, in any advanced economy, has paid the full freight for their own retirements since at least the end of WWII, and for a while it all kind of worked out. Well, it stopped "working out" damn near half a century ago... both here and overseas. We've been extending and pretending and kicking that can ever since.
I PAID THE FULL FREIGHT
As I wrote here before, I went back and converted each year my Social Security contributions into ounces of gold, added these up, and then started subtracting the withdrawals the same way. If I live to 82, which is my life expectancy, and if gold does not rally, I should just break even. (If gold does rally, then I will get back considerably less than I contributed.) Therefore, I disagree with "no one anywhere, in any advanced economy, has paid the full freight for their retirements since at least the end of WWI". I paid the full the freight.
Furthermore, many of my fellow boomers spent a lifetime contributing and then died before they were able to any withdrawals, or after just taking a few years of withdrawals. So they paid more than the full freight.
I would like to see the math of those who are saying that Social Security retirees are not paying the full freight.
I encourage everybody to save, every year, their Social Security statements, and to track their contributions in ounces of gold.
Yes, sure, maybe you're right, but nobody cares. everyone is "entitled" now to get everything they were promised and if a few other folks get screwed, they are OK with that. As an old boomer it pisses me off to be called a freeloader or burden if I even suggest that I might at least get back what I put in, much less was promised. But the war they have precipitated is tearing at us all. Old against young, poor against rich, black against white against Hispanic, all religions, sexual orientations and beliefs pitted against each other. This will get bad before better.
Not so, exaggerated numbers by those with an agenda. Of course pay as you go systems will not have evereything funded today.
Oh, I thought we had payed it forward. Remember the lockbox full of IOU's?
Greek election tomorrow ?
if the "radical" wins will GREXIT occur ? and dump all their debt ?
Who would attack Greece for their land value ?
It is all in stasis, until it isn't any more, then to utter chaos.
Interesting times !
which only tends to reinforce the notion that accumulation "money" at the top of the pyramid is in fact a mal-appropriation.
correct, the online financial dissident news sites love to blame the so-called entitlements, but in america, the vast majority of the so-called entitlements go to senior citizens.
Blame military spending, blame affirmative action leading to government incompetence, blame the prison state etc.
But don't blame senior citizens who have worked all their lives.
While a senior citizen may have worked all their life, they never contributed any amount close to the medicare or medicade costs.
tell it
Correct, Accounting101!
Phoenix Capital pumps out a kind of ideological world view that appeals to their clients, which happens to be displaced into Zero Hedge, where not everyone is as willing to assign blame to the lower levels of the social pyramid systems.
Follow the money to its SOURCE!
Phoenix Capital points out:
"...sovereign bonds are the senior most assets in the system. Those who own these in bulk are at the top of the financial food chain in terms of financial, economic, and political clout."
HOW did that kind of system originally develop?
Those bonds, as we think of them now, started in Italy, several Century ago, in order to pay for wars. That was developed much more since then, with the primary factors being what was described by historian Carroll Quigley:
"powers of financial capitalism
had another far-reaching goal,
nothing less than to create a
world system of financial
control in private hands
able to dominate the
political system of
each country and
the economy of
the world as
a whole ..."
The "bond bubble" is based on the ability of privately controlled banks to make the public "money" supply out of nothing, as debts, which frauds governments enforce:
THE SOURCE OF THE BOND BUBBLE IS THE SAME
AS THE SOURCE OF THE PUBLIC "MONEY" SUPPLY.
While it is theoretically possible to lay blame upon governments and their citizens, doing so tends to deliberately ignore the more profound social facts, which are that civilizations are controlled through applications of the principles and methods of organized crime ... Of course, my comments on this article by Phoenix Capital also apply to two other recent Zero Hedge articles:
Who Benefits When Bubbles Burst?
Spot The Trend: The Richest 1% Are About To Own Over Half Of Global WealthThe basics are that human realities are always systems of organized lies operating robberies. All private property is based on backing up claims with coercions. Money is measurement backed by murder, because the debt controls depend upon the death controls.
More philosophically speaking, human beings and human civilizations operate as entropic pumps of energy, which human beings tend to understand in as backward and bullshit ways as possible. When one applies the basic concepts of general energy systems to human systems one discovers that the results match the principles and methods of organized crime. Warfare was organized crime on a larger scale. The history of the surviving War Kings made the sovereign states, whose powers were effectively controlled by the Fraud Kings, the biggest gangsters, the international banksters.
The vast majority of people have been brainwashed to believe in the biggest bullies' bullshit, which currently is primarily the banksters' bullshit, that has permeated throughout the dominate natural languages, as well as the philosophy of science. Therefore, as you stated, Accounting101, the explanations for the existence of the bond bubble offered by Phoenix Capital were "Bullshit!!!" In my view, that bullshit is based on presenting relative DUALITIES as if those were fundamental dichotomies, and then, upon those false fundamental dichotomies, presenting bullshit "solutions" based on impossible ideals, which always actually cause the opposite to happen in the real world.
The Oligarchs operate a plutocracy, where their greatest "wealth" is the power to make the public "money" supply out of nothing, as debts, which frauds are enforced by governments requiring everyone pay taxes using that fiat "money." Meanwhile, the social facts regarding the FUNDING Of THE POLITICAL PROCESSES make the ideals of a supposedly "free and democratic society" become nothing more than a cruel joke!
There is FAKE DEMOCRACY, whose central feature is FAKE EDUCATION, provided by schools and mass media whose funding was also historically dominated by the banksters and their buddies, so much, for so long, that the vast majority of people have been brainwashed to believe in the banksters' bullshit. Meanwhile, Phoenix Capital presents the standard ways that reactionary revolutionaries cope with the social facts, by pretending that their favourite fundamental dichotomies are not false, and therefore, by blaming those people in the lower levels of the social pyramid systems for what the pyramidion people made and maintained through being the best at backing up lies with violence.
The social pyramids could be better perceived as toroidal vortices. However, that would take using more unitary mechanisms, rather than continuing to default to dualities, as the main ways that people tend to think about social facts. For instance, it is typical to distinguish between people who act as the predatory parasites upon other people who act as the productive prey. However, that is ultimately another dead-end analysis, based on false fundamental dichotomies, which then support bullshit "solutions" to those political problems, which continue to backfire badly, and actually cause the opposite to happen in the real world.
"Ownership" should be understood through the perspective that there is no private property which exists outside of some system of public violence. The production of destruction controls production. The trends towards 1% of the population "owning" about half the planet's wealth are due to the applications of the methods of organized crime through the political processes. Meanwhile, the vast majority of people have been brainwashed to believe bullshit about that social situation, so that they cannot effectively resist that happening to them, nor take any better responsibility for what it would mean IF they were able to more effectively resist that.
In that context, it is typical for reactionary revolutionaries like Phoenix Capital to present an explanation of the bond bubble based on massive LYING BY OMISSION. Instead of focusing on the banksters, who had the legal power to make the public "money" supply out of nothing, to "lend" to governments, the blame is laid on the banksters' political puppets, and enough of the masses of muppets which are fooled to vote for them. MOREOVER, that does not address the deeper reasons for how and why that happened!
More and more, the public "money" supply has been privatized, while, behind that, the public murder systems are also catching up towards similar levels of privatization. Thus, the increasing paradoxes that the powers of governments are serving the interests of the Oligarchs more and more, while the vast majority are being screwed worse and worse, within which context all of the significant public opposition groups are controlled to spout bullshit "solutions" which continue to backfire badly. Since that power to tax is backed up by the power of the police and other armed forces, the deeper realities are THAT money is measurement backed by murder.
NOT ONLY DO MOST PEOPLE NOT WANT TO UNDERSTAND THAT, THEY EVEN MORE SO DO NOT WANT TO UNDERSTAND HOW ANY REALISTIC RESOLUTIONS OF THE PROBLEMS MUST DEAL WITH THAT, BECAUSE THAT NECESSARILY EXISTS!
IF one is serious about THAT overall situation, then it becomes clear "our" governments are NECESSARILY the biggest form of organized crime, controlled by the best organized gangs of criminals. Furthermore, the ONLY genuine solutions to the problems MUST BE better organized crime, in which better death controls, to back up better debt controls, are the central core concerns. However, given that the established systems are controlled by the best available professional liars and immaculate hypocrites, while the vast majority of people have been reduced to Zombie Sheeple, there is no reasonable hope that enough of those mainstream morons will be able to understand the deeper nature of their problems, and therefore, what the deeper nature of any genuinely better resolutions of those problems would require.
After all, one of the most important features of the established systems is that they control their apparent opposition. Most of the so-called opposition tends to be Black Sheeple, whose bullshit "solutions" are based on recommending that everyone become better Sheeple. That is what Phoenix Capital is implicitly doing in the the article above. To ironically quote that article: "The ridiculousness of this should not be lost on anyone."
As you pointed out, Accounting101, Phoenix Capital's explanations for the bond bubble are "Bullshit!!!" My comments above are indications of the deeper degrees to which that is correct. We are living inside of a Bizarro Mirror World, or a Wonderland Matrix, where everything appears to be proportionately backwards and absurd. The biggest forms of organized crime, controlled by the best organized gangs of criminals, dominate civilization by promoting State Religions, which do their best to brainwash everyone to believe in bullshit, which is as backwards and absurd as humanly possible.
I REPEAT:
Human beings and human civilizations necessarily operate as entropic pumps of energy, which must manifest as the operation of the methods of organized crime. Hence, the bond holders are the pyramidion people, whose primary power is to control the SOURCE of the public "money" supply, as frauds which are enforced by governments. That works because the vast majority of citizens have been reduced to incompetent political idiots, who were brainwashed to believe in bullshit to the degree that they want to continue to believe in that bullshit.
Sovereignty is based on the power to rob, with the power to kill being the most extreme form of the power to rob. That power to tax, and to kill those who resist being taxed, is what backs up privately controlled banks being able to make the public "money" supply out of nothing as debts, which debt slavery systems have a structure which automatically drives their numbers to become debt insanities, which is the current bond bubble situation.
I REPEAT:
Sovereign bonds are basically due to the international banksters being able to make and maintain a political economy based on ENFORCED FRAUDS, which are profoundly problematic because no amount of enforcement can ever stop those frauds from being false, despite those frauds still being able to appear socially "successful" within those systems of legalized lies backed by legalized violence. The deeper problems are the degrees to which the dominate natural languages, as well as the dominant philosophy of science, are based on the biggest bullies' bullshit world view, that presents everything in ways which are so backwards as to become utterly absurd. In that context, there are basic denials and deliberate ignorance towards the FACTS that private property does not exist outside of some system of public violence, and that money is measurement backed by murder. In that current situation, most successful and surviving politicians are the banksters' puppets, who are voted for by enough of the mainstream muppets. It practically impossible to communicate more radical truths, about how the power that everyone has to rob, and to kill to back that robbery up, has been assembled and channeled into the forms of governments, whose powers are effectively controlled by the biggest gangsters, the banksters.
I REPEAT:
The sovereign bonds are the most extreme manifestation of the ways that our entire system is based on enforced frauds, wherein We the People are being robbed and defrauded, while the only publicly significant opposition is controlled to stay within the same bullshit frame of reference. There are NO genuinely better resolutions of those problems which could exist without understanding the deeper nature of those problems. However, BOTH the ruling classes, as well as most of those they rule over, do not want to understand their own realities better. The ruling classes want to continue to be able to promote the bullshit that benefits them (at least in the short to medium term), while most of those they rule over have been conditioned to not want to understand any better, since everything they believe has been based on bullshit, for generation after generation, after generation ...
In that context, Phoenix Capital continues to promote "simple to follow strategies you can use to not only protect your portfolio from a market downturn, but actually produce profits," in ways which their clients may well appreciate within the short to medium term. However, in the longer term, the kinds of deliberate ignorance and LYING BY OMISSION illustrated in Phoenix Capital articles, which are quite typical of many other articles republished on Zero Hedge, continue to be ironic, since those are grossly understating the degree to which the "Phoenix" is going to burn, and therefore, grossly underestimating how much more difficult it may be to arise again from those ashes.
Good rant\post!
The problem of entitlements is NOT the financial costs, although many will point to them as our economic downfall. The problem with entitlements is that through them, the public is captured by their inherent corruption. For corruption to take hold, it relies upon people believing they are benefiting from them, rich and poor. Ultimately slaves are restrained, not by chains, but by dependency and sense that survival is not possible in freedom.
This corruption persists because WE have all been corrupted. WE know corruption exists all around us but do nothing to change it because we don't want to chance losing what we have. We see an endless stream of posters complaining about the corrupt markets while continuing to invest, so addicted they cannot, will not quit. The system continues.
How do people not benefit from socialized health care? I'm all ears.
Thnx RM.
rm, your truth and candor is greatly appreciated. reality is like punch to the ego, libedo and the stars i see are not so distant anymore...
where do we all get some RM?
Keep it up RM. More are learning truth. Great post.
I thank you.
Gotta factor in currencies.
"Denominated in what?". If your talking rubles, euro's, yen...meh. Just print moar dolares and run the debt off to zero.
"You want your gold you can have your gold. That will be 12 DOLARES for a liter of petrol."
The bond bubble isn't going anywhere but up in 2015.
Short t-bills at your peril.
Exactly, yields are crashing. We may get another bounce off of 1.5% but the writing is on the wall.
The end is nigh.
Pssst...Saudi peninsula is the new Vietnam. Pass it on.
http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2...
Huh? The Fed simply buys up all outstanding bonds at or a little above market prices, and the problem (of the govt bonds) is solved!
That the currency gets destroyed in the process is just an unlucky coincidence...
The only way to make good on SS promises is to break out the gold.
HTTPS://www.s3.amazonaws.com/khudes/BILATERAL.PDF
you say: we’re in the late 8th, possibly early 9th inning.
I say: extra innings baby, extra innings baaaabbbbyyy!
they contol the umps, the stadium, the players and have the fans brainwashed to watch the game. only thing is the fans are clueless, but none the less, love an exta inning game. i say play ball fuckers, cause i got other stuff to do and it aint tb, nascar or any sports shit.
Bubble?
If private investors stop buying bonds, the Fed will simply continue to issue its fiat to buy every single bond the government issues. The government will issue fake bonds and the fed will buy them with fake fiat.
They can play this game forever!
Sorry Phoenix; you lose. Thanks for playing.
We are all Japan now.
Cash, Bonds, Gold...
what turnip truck did this nimrod fall off and rolled into zerohedge? the first third of this crap article says it's all the fault of soc.sec. and welfare. that this asshole could type this bullshit with a straight face without mentioning welfare for big business and banks is just a crime...a crime of silence on the greatest theft mankind has ever seen!