TedBits – Bombs er Bonds, Debacle at Our Doorstep! by Ty Andros
The breathtaking rush into the perceived safety and stability of the Bomb er Bond markets which began at the depths of the 2008 Global financial crisis are in blow off mode. A recent Bank of international settlements annual report has been ignored due to its message of CAUTION. The main stream media routinely blacks out these messages and have done so this time. Frenzied reach for yields are occurring throughout the world.
“Investors are gobbling up riskier assets like never before.”
Actually, we are closer to the 1996 lows in yields than it appears as back then it was 5 year treasuries versus 7 year treasuries being graphed now. This is understandable as over $35 Trillion dollars (35 million million) have been printed or issued out of thin air by lenders or central banks since 2008. That money is now frantically seeking a home. Keep in mind we operate in a reserveless banking system with leverage ratios officially about 33 to 1 but probably much higher if properly measured. Most people don’t understand that deposits used to drive lending; now the lending drives the deposits as can be seen in cash balances worldwide.
“Financial markets are euphoric, in the grip of an aggressive search for yield,”… And yet investment in the real economy remains weak while the macroeconomic and geopolitical outlook is still highly uncertain.”– Claudio Bono, Bank of International settlements, June 2014
The BIS report outlines several alarming facts related to syndicated loans; “—”for instance, credit granted to lower-rated leveraged loans” exceeded 40% of new loans for much of 2013. “This share was higher than during the pre-crisis period from 2005 to mid-2007? and “fewer and fewer of the new loans featured creditor protection in the form of covenants.”
Leverage and ISSUANCE is at record levels across a wide spectrum of credit and bomb er bond markets!
Over $642 BILLION Dollars of corporate DEBT sales in the first half of the YEAR at record LOW Rates sets and ALL TIME RECORD!
The dash for trash such as PiK toggles, cov lite, junk, commercial loans. corporates and US treasuries are at levels rarely seen in history. Can it go farther? Sure. $35 million million is seeking a home and income in a world that has a shortage of real investments. That’s a lot of cabbage rotting away from printing press and exploding credit issuance. Nobody knows when the last fools will be in at the top but it is certainly time to start looking for them. Money is just mindlessly seeking shelter from the central banks mandate to INFLATE or die. Central banks have joined the frenzy mindlessly rushing into overvalued tangible markets in exchange for the worthless paper (FIAT CURRENCY) on their balance sheets. Recent reports put the number at over $29 Trillion since 2008. Here’s another picture of the insanity afoot in the world from Lance Roberts at www.streettalklive.com:
“We have seen this exuberance before. In 1999, the old valuation metrics no longer mattered as it was “clicks per page.” In 2007, there was NO concern over subprime mortgages as the housing boom fostered a new era of financial stability. Today, it is the Federal Reserve ‘put’ that is unanimously believed to be the backstop to any potential shock that may occur.”
Those are all time lows in junk bomb er bond yields. Much of the printed money has fled the developed world for the emerging world where interest rates still put a cost (not zero) and return on money:
Informed observers know there has been no REAL ECONOMIC growth since 2008; actually it has been much longer than that. It has actually been over 30 years since real growth occurred in the developed world. All reported growth since the early 1980s has been debt disguised as growth. It is why your money has lost so much purchasing power since that time. Living standards are in freefall in REAL terms. It is this debt growth and debasement that has FUELED and DESTROYED the middle classes in the developed world. Growth became a function of printing money and debt issuance in thinly disguised socialist welfare states in Europe and the US.
“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”– Ludwig von Mises
The elites, banksters and insolvent governments of this era are following the latter route as have all their predecessors. This has been a bottom line of the present day situation since Breton woods II in August 1971 forever altered the definition and functions of money. One day the citizens of the world had semi sound real money in their hands and bank accounts to store their labor and wealth in and the next day it was IOU’s or morally and fiscally bankrupt public servants government and banksters. It was the greatest heist in history done in DAYLIGHT.
Now the greed and avarice of public servants, something for nothing constituents and the banksters which facilitates them KNOW NO BOUNDS and has outdone every previous episode in history. The boom has been tremendous but the bust will be one for the history books.
Real money is still available as it has been throughout time. Those are Gold, Silver, Commodities, land and in more recent century’s energy. Throughout history humans have consumed all of these and exchanged money for them. These are the basics of existence, always have been and always will be. To put into perspective how debt has substituted as growth here is something to ponder:
From 1950 to 1980, the world’s largest economy soared by 191% in inflation-adjusted terms, while the combination of household, corporate (including financial) and government debt increased by a mere 12%”
“In the following three decades, from 1980 to 2010, the U.S. GDP grew a more moderate 124%, yet total debt rose by an almost identical 125%”.
Did GDP increase or did the DEBT GROWTH create the illusion of GDP growth?
The answer is self-evident. The greatest experiment in leverage in HISTORY and money printing has been transpiring for over 44 years. Someday soon it will all end with a pop. On that day hope will turn to fear as the leverage FAILS. But the present day version has all the fingerprints seen throughout history and are now front and center. Now we are going to look at a number of pictures which are reflections of each other. The first is Global Money supply from 1986 to January 2013:
Yes, you see that right it has exploded from