The Beginning of the End of the $100 TRILLION Bond Bubble

[Big Sleazy]

http://www.zerohedge.com/news/2015-01-19/beginning-end-100-trillion-bond-bubble

What could possibly go wrong ? Everything is hedged... right ? Heeeeeee. heeeeeee. heeeeeeeee.... this is going to be awesome when this blows.

BS

 

[onthebottom]

http://www.zerohedge.com/news/2015-01-19/beginning-end-100-trillion-bond-bubble

What could possibly go wrong ? Everything is hedged... right ? Heeeeeee. heeeeeee. heeeeeeeee.... this is going to be awesome when this blows.

BS

The perverse effect will be that when small countries default (Argentina, Russia) demand for US Treasuries increase.

 

[Big Sleazy]

Initially. But when, not if, China de-pegs from the USD. Then you'll see carnage in the Bond market and it will happen overnight. Just like in Switzerland. another black swan will be if China and or Russia announce a Gold backed bond. In my circles that is the rumour as well as a Gold backed trade note. Then all those USD's come home to roost. Voila... currency War goes hot.

BS

 

[onthebottom]

Initially. But when, not if, China de-pegs from the USD. Then you'll see carnage in the Bond market and it will happen overnight. Just like in Switzerland. another black swan will be if China and or Russia announce a Gold backed bond. In my circles that is the rumour as well as a Gold backed trade note. Then all those USD's come home to roost. Voila... currency War goes hot.

BS

Put down the bong..... In your circles, now that's funny.

China is the last country that wants to see, or can afford a UST meltdown, they have a massive position, and no one to sell it to.

 

[danmand]

After speculation that Denmark will be next, the Danish Central Bank decreased deposit rate to -0.70.

PS, Big Sleazy: OTB believes that everything that happens in the markets is a triumph for the US, or at least that is what he posts.

 

[nuprin001]

After speculation that Denmark will be next, the Danish Central Bank decreased deposit rate to -0.70.

PS, Big Sleazy: OTB believes that everything that happens in the markets is a triumph for the US, or at least that is what he posts.

In fairness, for the last century or so, that would be the way to bet.

And what he says makes sense, WRT China's position in the US. If the US dollar tanks, China kisses goodbye to a LOT of its wealth. For China to make a decision like that would require decisions which place other, strategic values above the financial. China would have to choose to take a huge financial hit to leverage itself into the position as world hegemon. Or, it could just keep being rich and possibly end up in that position anyway.

The only way it makes sense for China to tank the US economy would be if China felt the US were an existential threat. Which the US very obviously not. The US is China's best trading partner. You don't screw over the guy who's making you that much money.

 

[onthebottom]

In fairness, for the last century or so, that would be the way to bet.

And what he says makes sense, WRT China's position in the US. If the US dollar tanks, China kisses goodbye to a LOT of its wealth. For China to make a decision like that would require decisions which place other, strategic values above the financial. China would have to choose to take a huge financial hit to leverage itself into the position as world hegemon. Or, it could just keep being rich and possibly end up in that position anyway.

The only way it makes sense for China to tank the US economy would be if China felt the US were an existential threat. Which the US very obviously not. The US is China's best trading partner. You don't screw over the guy who's making you that much money.

LOL

If danmand were able to make a point he would have, he was left with only is anti-US Napoleon knee jerk....

 

[Barca]

After speculation that Denmark will be next, the Danish Central Bank decreased deposit rate to -0.70.

PS, Big Sleazy: OTB believes that everything that happens in the markets is a triumph for the US, or at least that is what he posts.

He's not wrong though, that's how bond markets react.

 

[nottyboi]

Initially. But when, not if, China de-pegs from the USD. Then you'll see carnage in the Bond market and it will happen overnight. Just like in Switzerland. another black swan will be if China and or Russia announce a Gold backed bond. In my circles that is the rumour as well as a Gold backed trade note. Then all those USD's come home to roost. Voila... currency War goes hot.

BS

Ahh so you think buying gold will allow you to survive a nuclear war? The US has soooooo many leavers it can pull, they are not unlimited. But when people say the US$ is not backed by anything, I say it is backed by 12 nuclear powered super carriers.

 

[onthebottom]

Ahh so you think buying gold will allow you to survive a nuclear war? The US has soooooo many leavers it can pull, they are not unlimited. But when people say the US$ is not backed by anything, I say it is backed by 12 nuclear powered super carriers.

It's really backed by the largest, most innovative, flexible and transparent economy in the world with very high productivity and per capita GDP. Add to that a well functioning and transparent government and strong rule of law and you get a very safe place to save your money.

 

[Dave in Phoenix]

Yes they are always sensationalist trying to sell their disaster book based on exaggerated twisted facts although based on a small kernel of facts.

Every decade there is a new crisis that doesn't happen to sell books or be sensational.

The 2008 crisis was not because of the derivatives but because of bad mortgage underwriting. Although the banks still take huge risks in the U.S. with taxpayer backed funds.

The fact is in 2008 the world central banks avoided a global meltdown. I recall watching that fateful late night when commercial paper globally was frozen and without the assurance by the Fed and world central banks (including Canada's) money markets would not have been able to open when trading began on Monday. The 2008 crisis could have been far worse if not for various Central bank/political actions. Wall Street etc had to be bailed out but main street was not.

In the U.S. the TARP program actually had a profit from the bank bailouts. However, as usual the most wealthy benefited the most.

 

[Barca]

The 2008 crisis was not because of the derivatives but because of bad mortgage underwriting.

This is a rather simplistic and inaccurate summary of the credit crisis. Both these issues went hand in hand in addition to other contributing factors.

 

[onthebottom]

This is a rather simplistic and inaccurate summary of the credit crisis. Both these issues went hand in hand in addition to other contributing factors.

A few key factors:

Rating agencies and banks were too cozy (about as polite as you can be), The mix of weaker diversified mortgagess were given too high a rating, which, due to high spreads (and CDS) caused an avalanche of money (the notorious stupid German mone) to chase mortgages - the resulting underwriting failures (no-document loans) caused a bubble that burst....

 

[barnacler]

If we move into a bit of deflation long term government bonds are the best thing out there.