I know Americans are math challenged. Public schools are too busy teaching diversity and environmental propaganda about global warming to spend any time on adding, subtracting, multiplying or dividing. Here are a couple charts of doom. Japan has been on a kamikaze mission to destroy their economic system for the last 25 years and the plane is about to hit the carrier. Their total debt now stands at 1.053 QUADRILLION Yen. That’s right. QUADRILLION. That equals $8.8 trillion.
Interest rates in January on their 10 Year bonds reached an all-time low of 0.20%. This morning they reached 0.46%. When you are already paying $130 billion per year in interest and your interest rates double in a matter of months, you’ve gotta problem. If the worldwide bond market reassessment of risk continues, it won’t only be Greece crashing and burning. One of the biggest economies in the world will implode. And it will take the world with it.
U.S. 10 year Treasury rates are also soaring. Politicians and central bankers across the globe have done nothing but add debt, devalue currencies, create mal-investment with 0% interest rates, and prop up financial markets for the last six years. Now the bill is coming due. The slightest increase in interest rates will trigger a worldwide financial Armageddon. Bugs will be meeting windshields across the world.
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The Narrative that central banks control interest rates was always silly.
The limits to these things are elastic, not in the sense that the Bernanke’s & Yellen’s of the world can pull and push them, but in the sense that when stretched they embed tremendous (destructive) energy in their systems and that energy will SNAP BACK at some point, usually violently.
Interest rates will have to rise if the public demand for government bonds fall. Unless, the Federal Reserve agrees to buy more T Bills from the treasury.
As the public worries about the government they will send other types of assets higher and sell bonds.
Mark, it is a mistake to think all things can’t go down in nominal price at once.
All prices are set at the margin. Most people’s “wealth value” rises and falls like a tide, as each marginal transaction occurs at a higher or lower price than the prior trade.
You can have 100,000,000 owners of US T-bonds at $X, have a single trade occur at $X-y and every single unit of the 99,999,998 who didn’t trade change by -y. In this way, a single trade of a unit of a bond at a dollar lower can remove a million, or even a billion dollars of wealth from the system.
This is what people simply don’t get. All that “wealth” that rose as AAPL went from a couple dollars per share to over $130/share came out of NOWHERE, and it can all go back to NOWHERE if the trades go that way.
If the Fed puts up a sign saying, “We’ll buy every T-bill, T-note and T-bond you can sell us,” what do you think would happen?
CONgressmen will rush to issue another quadrillion in debt to dump on the morons at the Fed so each CONgressman can air-drop enough money on constituents to insure lifetime reelection.
Foreign heads of state will rush to the POTUS and demand another half-quadrillion in bonds be sold to the morons at the Fed so the USA can sell thousands of useless F-35 jets to every US-buddy Dictator on the planet.
No, there is no honor among these thieves. Congressmen, their financiers, Wall Street bigwigs, and central bankers are NOT ALL ON THE SAME TEAM. They do not have identical, parallel interests.
When the SHTF, they’ll all turn on each other with daggers in each hand.