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"More Than Half Of All Global Government Bonds Are Yielding 1% Or Less"
Earlier today, we were quite shocked when we heard two statements by central bankers uttered during a press briefing in Washington. The first comes from the ECB's Mario Draghi:
- DRAGHI: LOW RATES FOR LONG PERIOD INCREASE FINANCIAL STABILITY RISKS
The second: from his supposed nemesis, if only for public consumption and not during the BIS' bimonthly meetings in Basel, Bundesbank head Jens Weidmann, who said a carbon copy replica of what Draghi had said minutes prior:
- WEIDMANN SAYS LOW INTEREST RATES INCREASE FIN STABILITY RISKS
We were "shocked" because for once, we agree with central bankers. And to get a sense of just how right the two central bank heads are we go to Bank of America which overnight released a report in which it said that as of this moment, "53% of all global government bonds are yielding 1% or less (Chart 3)."
Let that sink in for a second.
And while you are contemplating that, here is another fact from Bank of America:
The global narrative remains maximum liquidity (Chart 2) & minimal interest rates. And it’s impossible to be max bearish with such an extravagant monetary backdrop.
Central bank assets now exceed $22 trillion, a figure equivalent to the combined GDP of US & Japan
So yes, low rates for a long period of time most certainly "increase financial stability risks" - the central planners are certainly correct about that. But next time they make that remark, perhaps someone from the media can ask Messrs Draghi or Weidmann the following question:
does the fact that central banks now collectively own nearly a third of global GDP in government bonds and equivalent assets - an amount that is greater than the GDP of first and third largest global economies, have anything to do with "low rates" and the fact that "financial stability risks" as of this moment have never been higher?
Oh, and good luck with that "renormalization."
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I think now would be a really good time for Wile E. Coyote to open that freshly delivered box from ACME.
WHAT, is this a Joke? The new toolbox does not have any tools in it! looks down.............gulp....................................
"ACME?"
Shift the A one letter to the left. The C 6 letters to the right. The M 2 letters to the right. And the E 9 to the right.
The banksters need to repay us.
The Central Banks have painted themselves into a corner. Now, as the result of their ZIRP to keep financial bubbles pumped up, they are falling back into the pernicious corner they've created, which is a black hole of negative interest rates. Once referred to as the Liquidity Trap, they've expanded the definition of this 'out of bullets' predicament and created the extraordinary dislocation where their supposed benefactors, the sovereign nations, only have buyers who are forced by decree to purchase their debt instruments. No longer is there a market incentive to own any sovereign debt when you have to pay for the privilege of owning it. How much longer can that last? The curtain is now being pulled back on the money-out-of-thin-air Wizards of Oz. They are expediting their own demise.
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After the bail-ins they'll pretty much own the planet.
As if they don't already.
22, 220, whatever it takes...
When interest rates are zero, you're the product.
The banksters need to repay us.
It costs nothing to ride on my guillotine.
This is super BULLiSH(IT)!!!!
Can't bail all the problems this time! There isn't enough money in the world even with the printing presses on overdrive and that doesn't include the rest of the disasters that we have coming also!
Nothing like quandary economics!
There is always enough gold to extinguish all debt if it is valued correctly.
Gold in the yellow brick road to the fields of erasers before witch hillaries castle of delete buttons still won't fix the mess we have on our hands and coming by the buttloads of Ponzi schemes between the devil details of outright hell on earth brought to u by gnashing teethers.
I'm sure they will have to nuke the problems with Armageddon! There is always that for a cure.
Hm. Is it just me or was the trend towards gradually dropping interest rates even before the 20th century world wars?
Keep in mind from 1790 to 1914 there was essentially no inflation. What was going on there that made earning good returns from lending one's own money harder and harder as time passed. The closing of the frontier? The increasing centralization of economic activity?
Anyone? Bueller?
I'm going to guess railroads had something to do with it. Today big business and government are deeply in bed with eachother. Railroads were the industrial revolution version of that. When you've got big stuff to fund, you don't want to be paying more interest than necessary. The first projects were highly profitable (and produced big gains in productivity). As they built more and more of them each of those projects became less and less profitable, adding less and less productivity to the economy. Only one way to make the math work in that situation- lower interest rates.
Now, I'm just taking a stab in the dark here. I don't know this for sure.
Rail was then expanded to the hard, epensive mountain pass projects, then offered to Africa, South America.
Nice projects for the investors and exporters, very bad payment terms for any nation wanting new rail.
… it was also a hell of a good era for Rap¡ng the Earth.
Unfortunately, the ol’ girl ain’t lookin’ so hot no more !
R E S E T. ...... is coming or is it already here ???
Coincidence that the last time interest rates were this low, there was a global monetary system reset as a result of the Bretton Woods agreement in 1944?
Country X issues large digital blip.
Country Y's Bank issues lots of smaller digital blips to exchange them for Country X's large blip.
X converts Y's blips into local blips and then exchanges these blips for the real products and labor that originate outside of their blipping affiliations.
3 weeks from the last tuesday after the next blue moon, Country Y will issue large digital blips and X will issue lots of smaller blips to exchange for Country Y's larger blip. Y will convert X's blips to local blips and then introduce them to the economy as the means of stealing real products and labor.
This is organized global racketeering by well dressed, well spoken, and well armed chameleons. This is theft, not banking.
The interest rate level itself, other than acting as a barometer of the theft, is a ruse. The con is what happens immediately to the principal and how it came to be.
Lol...how many are yielding less than the rate of inflation? 100%...making them effectively...worth...less...
If governments with huge debts were smart, they would be locking in these low rates for 10 to 30 years and restricting the issue of short term debt. Yes, the interest paid tomorrow will be higher - but the interest paid in 20 years will surely be lower - in fact, it may be the only hope to avoid collapse. But nah - they are not doing it!
So central banks are still printing fiat ad infinum on faith and credit to buy bonds. And we have low inflation. Great scientists these economists!
Jeesh this will end badly.
The real reason why they are worried is that the benefits of QE now destroy the natural advantage for banks/insurance companies/pension plans to play the yieldcurve.
So when starts QE to be negative for the financial system as a whole? Do we need more QE because of QE? It is the end of the road, anybody can see this coming.
They are really desperate to want me to take their fiat........THAT desperate......a bit like in a hyperinflationary event kind of way where holders of fiat want to offload their fiat real quick, perhaps?
A desperate need to turn more people into debt slaves....just before raising rates, (that many on ZH don't think they will do?)
War is coming. It is the only solution out of this financial dead end. There is a long history of war solving economic problems of the past and it will be used to try and solve the economic problems of today.
Central Bankers and Politicians are fools but when you have a system where stupid people elect stupid people, why is anybody surprised at the result?
War is coming. It is the only solution out of this financial dead end. There is a long history of war solving economic problems of the past and it will be used to try and solve the economic problems of today.
Central Bankers and Politicians are fools but when you have a system where stupid people elect stupid people, why is anybody surprised at the result?
TRUE STORY: When I was a kid in the 1980s my dad would buy me $100 face Double EE savings bonds. Do you remember those quaint days? He explained to me that I was helping Uncle Sam by lending him $50 bucks (actually my dad) and in a few years they would be worth $100 bucks as shown on the face. I asked my dad what Uncle Sam did with the money. My dad said, 'well, it pays for all of the planes and ships and the army and navy.
I thought it was the coolest thing ever. As I recall they paid about 7% interest rate back then....My dad bought a bunch in the 1970s as well. I ended up cashing those bonds in high school, bought my first car with them, and then got a job, and became a productive citizen. That's how that shit is supposed to work. At least that's what my dad taught me.
How can they raise rates in this environment - given the ever falling liquidity in FI markets - without triggering a massive collapse? There would have to be a very lengthy period of telegraphing the move to allow people to unwind long positions but the reverse seems to be happening.