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The Single Largest Misallocation of Capital in History
The global Central Banks, driven by their Keynesian lunacy, have induced the single largest misallocation of capital in history.
Nowhere is this clearer than in the bond market today.
Do the following sound normal?
1) Globally 45% of all Government bonds yield less than 1%.
2) Over 40% of European Sovereign bonds now have negative nominal yields..
3) German bunds have NEGATIVE yields as far out as 8 YEARS.
4) The 10-YR US Treasury yield is at levels not seen since we were in a World War.
True, the world faces issues today… so it’s not odd for bond yields to be lower… but are those issues on par with a disease that wiped out 25%+ of Europe’s population… or the single largest military conflict in history?
The bond market is now over $100 trillion in size. The large banks have used a small portion of this (under 10%) as collateral to generate over $551 trillion in derivatives.
The bubble is so massive, that the Treasury department had survival kits delivered to the large banks around the country in anticipation of a crisis.
The NY Fed, similarly, is increasing the scope of operations in satellite office Chicago branch in preparation of a natural disaster or other eventuality could shut down its market operations as it approaches an interest rate hike…”
And then of course there are the big banks themselves… who lobbied Congress to the put taxpayers on the hook for their (the banks’) future losses on their gargantuan derivatives portfolios.
The simple truth is that the Central Banks bet the financial system on their academic theories… and have found that the system didn’t respond as they hoped. The economic “recovery” is the weakest in 80+ years… and that’s based on data that OVERstates growth.
The Fed’s own research shows that its QE programs only dropped unemployment by 0.13%... spending over $390,000 per new job created between the start of the crisis and the alleged end of the recession.
The ECB hasn’t done any better. It is not actively CHARGING depositors for sitting in cash. Several EU nations are now showing metrics on par with 3rd world countries.
And then there’s the Bank of Japan… which has induced a record high number of Japanese on welfare… and boosted the misery index to a 33 year high (mind you, this period of 33 years includes the collapse of the biggest asset bubble in Japan’s history… and people are MORE miserable NOW).
Another crisis is coming. And judging from the actions of the Fed and others to prepare (survival kits, etc.) it’s going to be far worse than the 2008 collapse.
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The author makes the mistake of believing that the Fed, bankers, congres, etc., are incompetent. Many are, yes, but the architechts of our current policies KNOW EXACTLY what they are doing. They, like most of us here on ZH and anybody with more than two brain cells knew, the system was doomed at least since 2008, probably sooner. They set out to loot what was left of the system for themselves, similar to steeling the slver and fine china from the Titaic before heading to the lifeboats.
They knew what they were doing and were quite masterful at it, in fact. Stop trying to ascribe incompetence to what in reality is the greatest premeditated theft of wealth in the history of mankind.
Shoulda read a little history-about 1921 and Warren Harding
https://mises.org/library/forgotten-depression-1920
.....sounds like a big scam to me. How about you?
Bonds....based on what? Production? Equity? "Value"?
I smell bullshit.
Can the author please explain what is going on right now again?
I missed that part in the missive.
Yeah and some countries are in Austerity and badly unemployed, but invested in static assets.
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Ireland, $214.3 Billion US LT Treasuries
Brazil, $261.5 Billion US LT Treasuries
What folks don't get is that Keynes was paid FOR being wrong. It was the cover the banksters needed to keep lyin' cheatin' and stealin'. Those who knew the truth were demoted to lesser positions, lost tenure, or ex-communicated from their professions. It still happens, only on a greater scale. Never have so many students been lied-to for such great sums of money. Note: Not everything is a lie. Only the small, critical components, like a thick economic textbook without one mention of the word "gold." Kinda like explaining our solar system without mentioning the sun! I swear this is true, because I saw my son's economic textbook from his college. Had to keep my mouth shut so that he would pass his course. Yeah, it hurt. But at least now he knows and recognizes the truth.
Keynes was right, although almost all Keynesians are wrong. A credit/debt money based economy will of necessity go through cycles. What Keynes advocated was to attenuate the amplitude of the cycles by government running surplus/deficit countercyclically. That is, government take on debt and spend when the private sector is unwilling to do so (times of recession) and cut spending and pay off the debts when the private sector is getting into excessive debt (during booms). However, most Keynesians seem to have heard only the first part of his advice.
mutter mutter world is coming to an end
mutter mutter financial collpase
mutter mutter interest rates, commodity prices, stock indexes
mutter mutter buy our expensive report
mutter mutter you'll be saved
I had no idea your mom was from Germany until just now.