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How Governments Worked WIth the Banks to Create the $555 Trillion Interest Rate 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:
1) 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.
2) 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).
3) 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.
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Best Regards
Phoenix Capital Research
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What is in the Al Gore "Lock Box"?
http://www.cato.org/publications/commentary/al-gores-social-security-con...
Phoenix gets it wrong.
People want their SS money not because they think they're spending someone elses money, they expect it because it's THEIR OWN MONEY that they paid in, just like any other insurance plan. The fact that the Govt. raided the fund and left a pile of IOU'S an have to borrow to make good is another issue entirely.
You took my money all these years...Fuck you, Pay me.
People want what they paid for. What would happen if your car insurer told you that they can't pay out on your totalled car because they mismanaged their funds? The insurance agent would have a smoking hole where his office used to be.
The SS administration may face a similar situation at some point themselves.
2000 was dotcom
2007 was mortgages
2015 is government debt
team yellobama have been fraudulently bidding to defer, but it doesn't change the outcome
More claptrap from Phoenix Capital... Stick it to the old folks but ignore the military-industrial complex guerilla in the room. My anecdotal observation and reading of the polls suggest people do NOT want cuts to Social Security and Medicare. I don't care if the oldsters get some of my money, if they have paid in during their lifetimes and play by the rules. The oligarchs are only about .01% of the population, and what they pay into these systems are limited, so I suggest they tone down their greedy megaphone a little.
How about cut it all out, instead of picking and choosing who gets what? Fuck old people and fuck the US military industrial complex, aka Israel's tool for world domination.
How bout this...
Save your breath and get to work because you have a lifetime to pay in the same as I did.
And save some breath because you have a lot of humping to do to create more taxpayers for the Ponzi.
You're holding the end of the shitrope now just like us oldsters did in our turn. The fact that the shit is further up the rope these days is none of our concern.
Don't blame me. I don't make the rules. The guys who stole the SS money do.
Exactly, it was stolen long ago, and just because you paid in and criminals made promises they can't keep doesn't mean you get out 5x as much. What don't you understand about you having been ripped off, doesn't matter you or I paid in, it doesn't exist any longer.
Don't be a fool with his hand out. And I'm not paying shit to fund your retirement, I quit the US long ago and am already dumping citzenship next year, aka giving up my "owed" SS benefits, why don't you do the same and quit being part of the problem?
On top of all that, what if inflation takes hold some day, you'll be getting paid in increasingly worthless dollars, maybe rapidly so. I'd say don't depend on the same assholes that got us into this mess.
Dude - I've lost 15% of my assets since Ive been shorting the markets since March 2014
Ive been carnaged in the biotechs- on the Dax
unfortunately I did not understand the new game in town- Central Banks manipulation and HFT
It seems that 20 years of experience in the global markets didn't avoid my losses...and this hurts ....at the wallet and ego...
Unfortunately i was influenced by zero hedge that shows only one side of the coin and was absolutely wrong for 4 years.
I had so much confidence that the markets will tank but so far been totally wrong.
This will happen , the question if I will have enough patience....
Anyway this has been my worst year ever in which I lost alot of my trading and investmetn confidence....
IMHO if you have been trading on margins with the programs of the Highly Fuckedup Terrorists ( yes thats what they are- Financial Terrorists) you were a target.
You need to remove yourself from the scene . I did more than 3 years ago, having hurt my wallet too.
Now i wait for the collapse as it must come. One can only delay the inevitable. Mybe closer than we think as for example, one can see reports of Russia being begged not to quit the SWIFT system.
The SWIFT system is used by the NSA to home in on all accounts, extort and blackmail. You think we have world leaders! We just have leaders who lead for themselves or else they are removed by coups, assasinations or just disabled. Or like the former Nobel Chairman just demoted!
The can can be kicked down the road farther and for more time than you think. The real estate bubble lasted far longer than any rational person expected - until it reached absurd proportions - exemplifired by NINJA mortgages. Who the hell came up with THOSE?
They'll try and do ANYTHING to prevent market collapse. I suspect the strategy is now slash and burn - destroy any and all rational alternatives to 'their' markets.
The very last resort will be WWIII - TPTB have nothing to lose.... they've screwed the existing order, they've screwed the planet and figure 'What the hell?' They'll go into their bunkers thinking they'll come out to a vastly depopulated world where they can do as they wish - no need for social welfare programs. The few remaining will sell themselves into slavery for a shot at survivial.
The one flaw is that they think there will be anything left outside their bunkers.
NINJA are easy to explain, as is all the easy money from back in the heyday, real estate prices were rising 15% per year so it was of no consequence if the buyer defaulted. The banks could foreclose, "earn" all kinds of fees associated with the foreclosure, sell the property and be made more than whole when all was said and done.
Recycling is a Govt. approved Green Project.
Probably comes with some nice tax credits too.
The casino is rigged and you're not doing the rigging.
The banksters own government, their violence-puppets.
The banksters need to repay us.
Hmm 555 trillion i believe that is a bullshit scare tactic why because that is an unbelievable sum of fiat that has to be out there somewhere. No way I say and well the fear of a crash that never seems to come is a big nbusiness. Alot of advertising sold to us. But hey if I am wrong well that means alot of people gonna get hurt and well its not the avg joe that has nothing cause you dont miss what you dont have
Bossman1967, you are correct $555 T is an unbelievable amount, and yet, sadly it is probably true. You might imagine it more clearly, instead of imagining the amount of actual paper money & coins that have been printed for us to use, {typically called M2} there are many other 'forms of money' that the government (USA) trades in...daily.
Just imagine a thousand dollar bill, I've never seen one, but the US Treasury issues many of them everyday, in the form of a check. It might be a social security check, for example, payable to the retired person living in an household, there have been a lot of $1000.00 checks printed every day for the purpose of social security alone.
The diversity of accounts that the US Treasury uses is vast, and large. You might look it up sometime on the internet to see just how many income streams & expense streams the US government dabbles in. The IRS tax return checks the US Treasury issues, are huge, often much more than a $1000.00 each. Well you could say, ya but, heyyyyyyy the government received a huge amount of tax revenue that should cover any of those IRS tax return payouts, but the reality is that every year, for just one year, the US government shows that they do not have a huge amount of tax revenue that should cover those checks, in fact the annual debt for the government is running close to $18 T / year in debt, and this huge debt has consistently increased year after year, by law.
So basically the US government has been writing hot checks for all sorts of things like SS or IRS tax return and many other things because the US Congress & others have made it legal to do so, regardless how insanely the actual accounts have been mismanaged, regardless of the death & destruction they have intentionally brought about.
A lot of people have already been hurt, and killed because of the outright theft and financial mismanagement within the US government, and state governments, yeah and even local governments. Every branch of the various levels of governments are complicate by various means. I'm sure you have heard of Birmingham, AL, or Detroit MI, or the State of IL, getting is serious financial troubles because of financial mismanagement at the government level. And it is true that every, EVERY local or state police agency has nice new 'state of the art' equipment, and extra personnel hanging around...that extra stuff was paid for with a hot check from the Federal government. You have probably seen a vast increase in those type expenditures in the last 15 years.
You might be amazed by the stuff the USA government pays for, how's that cell phone/internet service you got going, or your local airport doing? And the only, THE ONLY reason we had an oil boom the last 10 years was because the US government/state/local was basically 'giving the mineral rights away'. And the US Congress and others often buy stuff they really want, you don't think those billion dollar aircraft carriers and nuclear silos are actually paid for with regular money, do you? Right or wrong, they simply cut another hot check, because they made it legal.
Now you might think: heyyyyyyyy but, now that the interest rate is super low, so therefore the interest rates on all these amounts,,,at least is tolerable at 0.63% or whatever (ZIRP/NIRP) as compared to what once was a FED discount window rate of 3 or 4%, and you would be correct. The problem becomes obvious tho, that 'the money' is now less valuable, and the interest rate proves it.
Which is worth more? $100.00 @ 4% or $100.00 @ 0.063% over 1 year? 'The market' has said they are willing to pay 4% for a year, because the dollar has a certain value. And the same 'market' has said because the dollar value is less, we will now only pay .063%. Therefore as long as 'the market' and the US government remain viable, the FED can not raise the interest rate at this point, because of the insane amount of US debt. This decision by congress & others was made years ago before the year 2000, when faced with trillions of debt at that time, their insanity of reason decided to lower interest rated, thus devaluating the dollar, which would cover all sorts of government theft and mismanagement, as it reigns to this very day, I guess one could call it a scare tactic, but it is difficult to scare those of us that actually have their own home-made tinfoil hat. lol
wwxx
Then I must suck because they only take from me and those I know. I wish they would just one time send something other than a big fuck you to me
Sure, right up until the 'avg Joe' can't get food.
Banksters are looting in the same vein as Ferguson, with the same class of people. The only difference is one has baggy pants with his crack showing and the other has a silk tie. Oh, one is shot dead and the other gets big bonuses.
Griekenland is bezig om zijn partners in de eurozone te waarschuwen dat netwerk WitteGejT bezig is met een nieuwe wereldorde. De Duitse minister van Economische Zaken Sigmar Gabriel is er inmiddels ook achter dat het TTIP-vrijhandelsverdrag met de VS niet als fundament het SCHULD=00P-principe heeft, maar het WAARHEID=MACHT-paradigma.
http://www.nu.nl/economie/4015932/duitse-minister-dreigt-onderhandelinge...
Netwerk Juncker onderhandelt momenteel met de Verenigde Staten (VS) over de timing van het uitrollen van het systeem 'Leven en Laten Leven'. Het zogenoemde Transatlantic Trade and Investment Partnerschip, of TTIP, herbergt namelijk een investeringsclausule (Investor-State Dispute Settlement, of ISDS in jargon) die zelfs nationale rechtbanken links laat liggen. De Duitser is blijkbaar nog niet op de hoogte gebracht van de nieuwe beschavingsvorm die is gebaeers op de wiskundige deginitie van de absolute waarheid en noemt de 'privatisering' van geschillenbeslechting zelfs een MACHTS-greep door netwerk WitteGejT.
http://www.neurope.eu/article/barnier-state-banking-union#comment-143202...
Oostenrijkse minister Hans Jörg Schelling van Financiën: We hebben twee problemen op dit moment. Het ene is het vertrouwen in Griekenland, omdat als wij iets beslissen het de volgende dag weer anders is. Het tweede probleem is dat we niet de feiten en cijfers krijgen. En het is erg moeilijk om beslissingen te nemen op basis van niets".
Eurogroepvoorzitter BloemigeJeroen is inmiddels op de hoogte gesteld dat de Grieken bezig zijn om netwerk Juncker te overtuigen dat het systeem 'Liegen om te Leven' niet meer te redden is. Schelling vertelde in een interview met het Oostenrijkse radiostation ORF dat de Grieken eerst hun eigen nationaal parlement inlicht over het nieuwe script van de 3e SpinozaGolf en dan pas de rest van de wereld.
Netwerk Juncker: "Ze doen dit elke dag, en dat is niet bevorderlijk voor het vertrouwen. Dat is het grootste probleem dat we op dit moment hebben".
Netwerk 'WitteGejT' is inmiddels op de hoogte dat Wim Geerts - topambtenaar van Buitenlandse Zaken - is medegedeeld dat een mogelijke handelsboycot tegen Nederlandse bedrijven is gebaseerd over het bewust stilzwijgen over de ontdekking van de wiskundige definitie van de absolute waarheid. De gedachte dat Timmermans de plooien in Riyad glad kan strijken met een verhaal over het 'puberaal gedrag van één parlementariër' is natuurlijk psychosegeloof van de eerste orde.
http://www.ftm.nl/obama-s-ambitieuze-belastingplan/#comment-1361015882
RuitenHeer: "Ik ben blij dat ik op deze manier de kans krijg onder de aandacht te brengen wat er voor afschuwelijks gebeurt op het gebied van waarheiddelen in Nederland."
What he said.
Fahrvergnügen
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