Category Archives: Debt

Why Bonds Are Behaving Like Risky Assets, by MN Gordon

Bonds are always risky assets. People just forget that after an almost 40-year bull market. From MN Gordon at economicprism.com:

“When the [credit] delusion breaks, people all with one impulse hoard their money, banks all with one impulse hoard credit, and debt becomes debt again, as it always was.  Credit is ruined.”

– Garet Garrett, 1932, A Bubble that Broke the World

Down, Down, Down

Third quarter 2022 ends today [Friday].  We’re entering the year’s home stretch.  Thus, we’ll take a moment to observe where money and markets have been, so we can conjecture as to where they’re going.

To begin, United States stock markets are in an epic battle between bulls and bears.  For most of the year, the bears have been delivering heavy blows.  But the bulls have not taken their punches lying down.  Here’s a quick review of the three major U.S. Indexes…

After peaking out on January 4, 2022, at 4,814.62 the S&P 500 declined 24.46 percent to an interim bottom of 3,636.87 on June 17, 2022.  The DJIA fell approximately 19.71 percent over this time.

The NASDAQ’s decline commenced on November 22, 2021, at a peak of 16,212.23.  It then cascaded to an interim bottom of 10,565.14 on June 16, 2022, for a top to bottom decline of 34.83 percent.

The indexes then rallied into mid-August.  Many investors thought the bear market was over.  They invested accordingly.  But, alas, it was merely a sucker’s rally.  September was ugly.

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The Disease Or Cure? Take Your Pick! by Dennis Miller

Most of the economic problems the U.S. faces can be traced back to the Federal Reserve. From Dennis Miller at theburningplatform.com:

Since I began my cancer treatment in 2019, my outside travel has been curtailed. Doctors, restaurants, and an occasional trip to visit family have been about it.

The good news is now I have more energy and feel like getting out and doing fun stuff. I recently made a trip to our local Factory Outlet Mall. I used to enjoy window shopping and eating in the food court. I was shocked, and unhappy with what I found.

The mall used to be full of cool stores, bustling with traffic. The photo is disheartening. I’d guess 40% of the stores are vacant. Stores closing, people losing jobs, landlords hurting, mortgage and bonds defaults are happening for the wrong reasons. It’s upsetting, but I realize there is not a damn thing we can do about it. We are on our own….

The Disease

Former congressman Ron Paul believes the cause of our economic problems is central banking:

“It is amazing that more individuals do not question the idea that inflation, recessions, unemployment, and booms and busts are necessary features of a sound monetary system. Even many otherwise staunch defenders of free markets maintain a child-like faith in central banking. …. These conservatives do not understand that the problem is the existence of a central bank with the power to manipulate the currency.”

Irresponsible politicians, coupled with central banking, is a cauldron for the economic problems we face today.

Academics believe in Keynesian economics. Keynes believed government spending should help thwart a bad economy and get it turned around. He also felt during good times, government revenue should exceed expenses and the surplus should be used to pay down debt.

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Giorgia on Our Mind, by Pepe Escobar

Fascist globalists of all stripes are upset by the election of Giorgia Meloni. Many have resorted to calling her a fascist—pure projection. From Pepe Escobar at strategic-culture.org:

Grab the Negronis and the Aperol Spritz; it’s show time.

It’s tempting to interpret the Italian electoral results this past Sunday as voters merrily hurling a bowl of lush papardelle with wild boar ragu over the collective bland faces of the toxic unelected Euro-oligarchy sitting in Brussels.

Well, it’s complicated.

Italy’s electoral system is all about coalitions. The center-right Meloni-Berlusconi-Salvini troika is bound to amass a substantial majority in both the Parliament’s Lower House and the Senate. Giorgia Meloni leads Fratelli d’Italia (“Brothers of Italy”). The notorious Silvio “Bunga Bunga” Berlusconi leads Forza Italia. And Matteo Salvini leads La Lega.

The established cliché across Italy’s cafes is that Giorgia becoming Prime Minister was a shoo-in: after all she’s “blonde, blue eyes, petite, sprightly and endearing”. And an expert communicator to boot. Quite the opposite of Goldman Sachs partner and former uber-ECB enforcer Mario Draghi, who looks like one of those bloodied emperors of Rome’s decadence. During his Prime Ministerial reign, he was widely derided – apart from woke/finance circles – as the leader of “Draghistan”.

On the financial front that otherworldly entity, the Goddess of the Market, the post-truth equivalent of the Delphi Oracle, bets that PM Giorgia will insist on the same old strategy: debt-funded fiscal stimulus, which will turn into a blowout in Italian debt (already huge, at 150% of GDP). All that plus a further collapse of the euro.

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Sustainable Debt Slavery, by Iain Davis and Whitney Webb

What’s sustainability all about? From Iain Davis and Whitney Webb at unlimitedhangout.com:

In this first instalment of a new series, Iain Davis and Whitney Webb explore how the UN’s “sustainable development” policies, the SDGs, do not promote “sustainability” as most conceive of it and instead utilise the same debt imperialism long used by the Anglo-American Empire to entrap nations in a new, equally predatory system of global financial governance.

The UN’s 2030 Agenda for Sustainable Development is pitched as a “shared blueprint for peace and prosperity for people and the planet, now and into the future.” At the heart of this agenda are the 17 Sustainable Development Goals, or SDGs.

Many of these goals sound nice in theory and paint a picture of an emergent global utopia – such as no poverty, no world hunger and reduced inequality. Yet, as is true with so much, the reality behind most – if not all – of the SDGs are policies cloaked in the language of utopia that – in practice – will only benefit the economic elite and entrench their power.

This can clearly be seen in fine print of the SDGs, as there is considerable emphasis on debt and on entrapping nation states (especially developing states) in debt as a means of forcing adoption of SDG-related policies. It is then little coincidence that many of the driving forces behind SDG-related policies, at the UN and elsewhere, are career bankers. Former executives at some of the most predatory financial institutions in the history of the world, from Goldman Sachs to Bank of America to Deutsche Bank, are among the top proponents and developers of SDG-related policies.

Are their interests truly aligned with “sustainable development” and improving the state of the world for regular people, as they now claim?  Or do their interests lie where they always have, in a profit-driven economic model based on debt slavery and outright theft

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CBDCs, SDRs, and the Re-Monetization of Gold, by Nick Giambruno

Banks and central banks relentlessly debase their fake money, they are setting the stage for the return of real money, gold. From Nick Giambruno at internationalman.com:

Central bank digital currencies

The current monetary system is on its way out.

Even the central bankers running the system can see that.

That’s why they are preparing for what comes next as they attempt to “reset” the system.

It’s important to emphasize that nobody knows what the next international monetary system will look like—not even the elites. However, they know what they want it to look like and are working hard to shape that outcome.

Next, I’ll examine their preferred outcome.

Plan A: CBDCs and SDRs

The new international monetary system the central bankers would prefer involves central bank digital currencies (CBDCs) and the International Monetary Fund’s Special Drawing Rights (SDR) replacing the US dollar as the world’s new reserve currency.

Despite all the hype, CBDCs are nothing but the same fiat currency scam with a new label on it—and zero privacy. They will make it even easier for the government to inflate the currency, and that’s what I expect them to do if they impose CBDCs on us.

However, it’s doubtful CBDCs can save otherwise fundamentally unsound currencies—as I believe all fiat currencies are.

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The Bear-Market Rally in Stocks, Bonds, Mortgages Wiped Out: Why This Nails the Parallel to the Dotcom Bust, by Wolf Richter

This is a debt contraction, and when debt contracts, assets prices go down. From Wolf Richter at wolfstreet.com:

But this time, there’s over 8% inflation.

The Dow Jones Industrial Average on Friday closed about 300 points below its June 16 low, thereby having more than wiped out the bear-market rally gains. For the Dow, the bear-market rally started on June 17 and ended on August 16. During the two-month rally, the Dow had jumped 14%. By Friday at the close, it was again down 20% from its all-time high.

The S&P 500 Index, on Friday intraday, fell through its closing low of June 16 – the infamous 3,666 – and then bounced a little to close 27 points above the June 16 low, at 3,693. During the two-month bear-market rally through August 16, the index had surged 17%. By Friday, the index was down 23% from its all-time high.

The Nasdaq closed about 2% above its June low. During the two-month rally, it had soared by 23%. Many of my Imploded Stocks that are now trading for a few bucks, had shot up by 50% or more, and a bunch of them doubled, before re-imploding after mid-August.

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This Is the Way the World Ends, by James Howard Kunstler

Stocks are diving and more importantly, interest rates are climbing. Together, the portend an economic crisis. From James Howard Kunstler at kunstler.com:

That “singularity” so many blab about is not what they think it is: the merging of human intelligence with Bill Gates’s Office products, leading to an orgasmic nirvana of infinite memoranda from your HR department concerning new diversity, inclusion, and equity policy. Rather, I speak of the magic moment when the necromancers of finance discover that the proverbial can they’ve been kicking is filled with Schrödinger’s cat food… and the road they’ve been kicking it down actually comes to a dead end up their own highly-credentialed wazoos. Economics will never be the same hereafter.

The bond market has gone south, and that spells The End for the great game of financialization. The bond market is Moby Dick compared to the little blowfish that is the stock market. The global money system is based on bonds, which are… what? That’s right: loans… promises to pay you X at some future moment. So, what happens when a daisy-chain of promises-to-pay gets broken? Or, perhaps more precisely, when all those promises lose their last shred of plausible reality? Why, the money that these broken promises are denominated in loses its essential cred. Trick question: how much is worthless money worth? (Answer: not enough to pay for a can of Schrödinger’s cat food.)

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“Joe Biden’s” Last Stand, by James Howard Kunstler

“The shit has already hit the fan.” From James Howard Kunstler at kunstler.com:

Historians of the future, grilling spatchcocked plovers over their campfires, will need not ponder for even a New York minute who started World War Three in the rockin’ 2020s. They will point straight to the waxy, furtive, larval figure known as “Joe Biden,” by then judged a moral weevil of such epic low degree that he became an embarrassment to all the other sewer-dwelling denizens of the dank DC underworld, including the roaches, the rats, the humble shipworms eating through sunk oaken foundations of buildings long forgotten, the writhing maggots rinsed from a thousand restaurant dumpsters, the slithering hellgrammites, millipedes, silverfish, pillbugs, termites, dung-beetles, woodlice, and, not least, the scaly lawyers spawned out of the infestation beneath K Street called Perkins Coie LLP. Even these would loathe and disdain the thing that came into this world as “Joe Biden.”

Let us agree that the place called Ukraine was never any of America’s business. For centuries we ignored it, through all the colorful cavalry charges to-and-fro of Turks and Tatars, the reign of the dashing Zaporozhian Cossacks, the cruel abuses of Stalin, then Hitler, and the dull, gray Khrushchev-to-Yeltsin years. But then, having destroyed Iraq, Afghanistan, Libya, Somalia and sundry other places all on a great hegemonic lark, the professional warmongers of our land and their catamites in Washington made Ukraine their next special project. They engineered the 2014 coup in Kiev that ousted the elected president, Mr. Yanyukovich, to set up a giant grifting parlor and international money-laundromat. The other strategic aim was to prepare Ukraine for NATO membership, which would have made it, in effect, a forward missile base right up against Russia’s border. Because, well, Russia, Russia, Russia!

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Looking at the Economic Myth of the “Soft Landing”, by Frank Shostak

“Soft Landing” is a Wall Street concoction to convince clients not to sell their overpriced stocks. It takes a market crash before they sell. From Frank Shostak at mises.org:

According to commentators, countering inflation requires monetary authorities to actively restrain the economy, with “experts” believing that higher interest rates need not cause an economic slump. Instead, they believe that the Fed cab orchestrate a “soft landing.” It is questionable, however. that a soft-landing scenario is possible.

Money Printing Creates Economic Damage

If inflation is defined as increases in the money supply rather than increases in prices, then it becomes clear that all that is required to counter it is to close all the loopholes for the generation of money out of “thin air.” The increases in the money supply and not increases in prices inflict damage to the wealth generation process.

Originally, paper money was not regarded as money but merely as a representation of gold. Various paper money receipts represented claims on gold stored with the banks. The holders of paper receipts could convert them into gold whenever they deemed necessary. Because people found it more convenient to use paper receipts to exchange for goods and services, these receipts came to be regarded as money itself.

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Gold has never been so attractive, by Alasdair Macleod

Sooner or later, probably sooner, real money is going to catch a bid and never look back. From Alasdair Macleod from goldmoney.com:

In our lifetimes, we have not seen anything like the developing economic and financial crisis. Rising interest rates are way, way behind reflecting where they should be.

Interest rates have yet to discount the continuing loss of purchasing power in all major currencies. The theory of time preference suggests that central bank interest rates should be multiples higher, to compensate for the current loss of currency purchasing power, enhanced counterparty risk, and a rapidly deteriorating economic and monetary outlook.

There is no doubt that the majority of investors are not even aware of the true scale of danger that interest rates pose to their financial assets. Some wealthier, more prescient investors are only in the early stages of beginning to worry. But if you liquidate your portfolio, you end up with depreciating cash paying insufficient interest. What can you do to escape the fiat currency trap?

This article argues that having everything in fiat currencies is the problem. The solution is a flight into real money, that is only physical gold — the rest is rapidly depreciating fiat credit. Owning real money is the only way to escape the calamity that is engulfing our current economic, financial, and fiat currency world. 

Avoiding risk to one’s capital

From conversations with family and friends, one detects an uneasy awareness of increasing risk to investments. There are two broad camps. The first and the majority are only aware that interest rates are rising, and their stocks and shares are falling in value but fail to make the connection fully. The second camp is beginning to worry that there’s something very seriously wrong.

Investors in the first camp have usually delegated investment decisions to financial advisers, and through them to portfolio managers of mutual funds. They have taken comfort in leaving investment decisions to the experts, and besides the odd hiccup, have been rewarded with reasonably consistent gains, certainly since the early noughties, and in many cases before. They trust their advisers. Meanwhile, their advisers are rewarded by the volume of assets under their management or by fees.

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