‘Worst bond rout since 1990,’ said a headline in The Irish Times last week.
And there it was, in plain view. The beginning of the end. Now we know how it will turn out.
But wait… We are getting ahead of ourselves.
Many dear readers continue to question our sagacity and patriotism.
They needn’t bother. We make no claim to either. Both are beyond our reach, one because it is too far above us…the other, too far below.
But those are just two of the many things we lack. We have been married for more than 30 years; we are well aware of all of them.
In fact, we claim only one quality: humility. And even as to that, we are insincere. We follow the news, humbly, and often have the agreeable delusion that we are ahead of it.
The messiah is coming
So it was when the election of 2016 threw up an unlikely candidate for president who is now our unlikely president-elect. We took no position, neither on him nor on his opponent.
We merely guessed that whoever won, the cronies and insiders who actually run the government would come out ahead.
And now it is the advent season on the Christian calendar. The days grow short in the Northern Hemisphere and a hush settles on the world as we await our saviour.
There is a twinkle in the sky over Manhattan. And we — along with many others — would like to believe that unto us a messiah is about to be born: one Donald J Trump. Will he not deliver us out of our bondage…challenge the empire…smite the Deep Staters…and return the United States of America to a modest republic, minding its own business and letting its people mind theirs?
Our profound humility prevents us from knowing the answer. All we have are eyes and ears…but, based on what we have seen so far, we doubt it. And noticing the biggest selloff in the bond market in 26 years, we can take another guess about how this will go down:
Early next year, just after Christmas, our hero, Donald J Trump, will make his triumphal entry into Washington. His path strewn with fake dollars…the streets lined with cheering crowds…he will arrive at the nation’s capital.
He will put forth his plan — tax cuts and spending increases — which, if enacted, are supposed to give life eternal to our bull market on Wall Street and our economic expansion, such as it is, on Main Street.
Yes, he proposes to vanquish death — at least the much-awaited death of the 35-year-old credit boom.
Markets and Money editor Vern Gowdie reveals the three crisis scenarios that could play out as the next credit crisis hits Aussie shores…and the steps you could take to potentially navigate profitably through the troubling times ahead.
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Multiplying the loaves and fishes
The economy suffers from too much debt — built up in a funny money, EZ credit system. No credit expansion lasts forever. All of them die sooner or later.
This one has already tried to die at least twice — in 2000 and again in 2008. Each time, it was brought back to life by the Fed with injections of more EZ money. And each time, the resurrection left the economy in worse shape than it was before it died.
It is likely that the bull market in stocks, GDP growth, and credit expansion will die again soon. But ‘The Donald’ proposes to banish death with a program that will create jobs, raise incomes, boost tax revenues, elevate the rate of consumer price inflation, and thus reduce the real weight of debt.
With this heady scheme in place, his government will be able to borrow more and more money…while the actual value of the debt will be lifted off our shoulders by inflation.
A dear reader spells it out:
‘Yes, we will have a lot of inflation, but think what a few years of 100% inflation would do to the weight of America’s debts and to the anguish of her creditors. Wages should go up with high inflation, too. This will cause our working class, which voted for Trump, [to] grumble, but having no assets, it will not be too big a problem for them. The bondholders, who don’t have many votes, will scream, but nobody will care about them…
‘Our debts in old dollars would be satisfied with worthless Federal Reserve Notes in denominations up to a billion. The creditors will be unhappy, but our citizens would be delighted… So, there is a way out! We just have to face up to the problem, screw our creditors, and reward our faithful voters. It is not a total disaster, and we will emerge into a brighter, better, more golden world with a second term for Trump.’
Is that what’s ahead? Will Donald Trump perform his first miracle, multiplying the loaves and fishes?
Or is that ‘bond rout’ telling us something important? That the creditors won’t sit still for it?
For Markets and Money, Australia
From the Archives…
- Watch out! Trouble in this debt-fuelled market could spark a worldwide financial panic: Stocks won’t be the only markets that crash as Global Financial Crisis 2.0 sweeps across the planet. There’s another, multibillion dollar credit market relied upon by companies — as well as local, state and national governments — that’s poised to collapse once the credit bubble pops. And the fallout could severely impact your wealth.
- The presidential decision that paved the way to our six decade-long debt binge: Australia — and the rest of the world — is living a lie. Debt has funded our lifestyle, NOT production and savings. Today’s global debt stands at $200 trillion. That scary number is the official debt level. The real debt tally will spin your head…
- What happens when Australia’s gigantic credit bubble goes ‘pop’: We’ve experienced two previous credit bubbles from 1880–1892 and 1925–1932. The current credit bubble has been building since 1950. A 65 year build-up. What happens when this bubble finally pops? As Vern will show you…it’s not pretty.
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