Bond Bubble = Debt Jubilee – Jeff Nielson
by Jeff Nielson, Sprott Money
An interesting article has neatly encapsulated the global (but primarily Western) “bond bubble”:
The global bond bubble has ballooned to more than 76 trillion dollars, and interest rates have never been lower in modern history. In fact, 25 percent of all government bonds in Europe actually have a negative rate of return at this point. There is literally nowhere for the bond bubble to go except for the other direction, and when this bull market turns into a bear it will create chaos and financial devastation all over the planet.
There are, however, two problems with this article on the global bond bubble. First the article makes no attempt to identify who (or what) is pumping up this “bubble” to a level of literal perversity: “negative” interest rates, i.e. paying someone to borrow money from you. The second problem is that there is no attempt to specify what is meant by “chaos and financial devastation all over the planet”, when the outcome could not possibly be more obvious.
Dealing with these issues in order; there could never be a legitimate reason for any interest rate on any debt to go “negative”. As noted in a previous commentary; even so-called “0% interest rates” are a prima facie fraud, since it is literally providing someone (in this case; the Big Bank tentacles of the One Bank) with free money – and in near-infinite quantities.
So we begin with the fact that these negative interest rates are a fraud and a crime. Then, as with any crime; we look for a suspect with “means, motive, and opportunity”. We don’t have to look far. Going first to motive requires adding a little context.
First readers need to understand “the bond market”, which is a market for debt. In the economic insanity of our Wonderland Matrix; we have a plethora of pseudo-expert economists and traders in these markets who have brainwashed the world into treating debts as assets. True, holding the IOU’s of some entity does allow one to blood-suck like a financial parasite. However, as a supposed asset class; debts represent the ultimate in counterparty risk – the obvious/imminent risk that the debtor can’t pay, or won’t pay, turning the “asset” into nothing but a worthless piece of paper.
In the bond market; the “price” of these bonds is simply the inverse of the interest rate attached to that debt. Explaining this requires providing a simple hypothetical example. We start with two $100 bonds, each issued at 5% interest, but by two, separate entities: Debtor A and Debtor B.
Suppose that Debtor A’s debt is somewhat coveted, as it is widely believed that there is little risk of default. If traders in this market bid up the price of this bond because they want to hold it (and collect the interest), this translates to a decrease on the “yield” (i.e. the rate of interest). So if traders bid-up Debtor A’s bond by 20%; its price would go 20% higher, but the rate of interest would go 20% lower: from 5% to 4%.
Now suppose Debtor B is perceived to be a debtor with a high risk of default (e.g. the United States), and so the market bids-down this debt, meaning no one wants to hold this debt at the original rate of interest. The price goes down 20%, causing the rate of interest to rise 20%, from 5% to 6%.
As has been pointed out in the past; the deadbeat debtors owing most of this bond debt, meaning the corrupt and decaying economies of the West, are nearly all hopelessly insolvent. It’s only by fraudulently manipulating these interest rates (and bond prices) to literally perverse levels that these deadbeat governments are able to delay (but not prevent) sovereign debt-defaults, in domino-like fashion. In other words; Debt Jubilee. If Western interest rates were ever normalized, to somewhere between 3 – 5%, most of these Western nations would implode on the dramatically higher interest rates in a matter of months. Some (most notably the United States) would implode in a matter of weeks.
So the suspect with the obvious motive for fraudulently manipulating interest rates into negative territory is the entity or entities that hold of most of this debt, i.e. the One Bank. Most of these bond debts are no longer owed to ordinary citizens, or even public/private institutions. The holders of most of these $trillions in (Western) IOU’s are the Big Banks of the West.
Our motive is clear. The One Bank wants to prop-up these debtors (and continue to blood-suck our economies with massive interest payments) because if it fails to do so, the debts implode and its “assets” immediately go to zero. This brings us to means.
The manipulation of (primarily) Western interest rates is a subject which has been dealt with in numerous, previous commentaries. The “tool” used here are so-called “derivatives”: fraudulent (and previously illegal) bets on this debt market. What can gamblers bet on, in a debt market? That’s simple: the risk of debtors defaulting, or the rate of interest on the debts.
The “gamblers” holding the vast majority of the $1.5+ quadrillion in bets in this rigged casino are (surprise! surprise!) the Big Bank tentacles of the One Bank. When the gamblers bet on the risk of debtors defaulting, they give that the euphemism of “credit default swaps”. When the gamblers want to bet on interest rates; they give that the euphemism “interest rate swaps”.
These pieces have shown how credit default swaps can be used (and have been used) to manipulate interest rates, higher or lower. With the ability to manipulate interest rates to whatever number it desires; the One Bank was able to harvest $trillions in profits, from the Chumps who chose to bet against the Big Banks, in their (rigged) interest rate swaps.
While interest rate swaps are used for profit; credit-default swaps are used as a weapon or a shield, depending on whether the One Bank wants to manipulate a particular interest rate higher or lower. When it wants to punish a nation (such as the first time it drove Greece into debt-default); it uses this tool as a weapon. When it wants to shield debt from a rational rate of interest; it uses credit-default swaps to manipulate interest rates lower.
Obviously no rational entity would want to hold any debts which paid 0% interest, and it certainly wouldn’t want to hold any debts where it had to pay interest to the debtor (i.e. a negative interest rate). Thus fraud of this magnitude in the bond market requires one more ingredient: a massive supply of funny-money to fund these fraudulent transactions, meaning any/all bond purchases at a rate of 0% or lower.
This brings us to “opportunity”. Previous commentaries have pointed at the Federal Reserve as the “counterfeiter” who is (secretly) funding this massive fraud – at least the U.S. component. However, with its Big Bank tentacles having (literally) a near-infinite supply of its own funny-money (thanks to the fraud of “fractional-reserve lending” + “0% interest rates”); it could be the One Bank itself that is pumping up prices (and driving down interest rates) to utterly perverse and obviously fraudulent levels.
Having dealt with who/what is responsible for manipulating Western debts to 0% and lower; this brings us to the second deficiency of the commentary originally cited: the failure to specifically describe what will happen when this massive bond bubble implodes. Here the proverbial cat is out of the bag, as readers have already been told what will happen (and must happen) to these unsustainable bubbles of debt: Debt Jubilee.
Apart from the fact that Western debt-bubbles are individually woefully unsustainable; our “financial engineers” (the criminal psychopaths of the One Bank) have intertwined all these debt-bubbles, as an integral part of its “too big to fail” fraud. When one of these debt-bubbles goes “ka-boom”, they all go “ka-boom” – and that is simply Debt Jubilee.
At this point it is necessary to back-track slightly, back to the motive for the One Bank’s massive frauds and crimes in this debt market. We know why this financial vampire wants to protect its so-called “assets” today (through manipulating interest rates lower), but why would it have ever chosen to accumulate all of these IOU’s, in the first place – not only public debt, but private debts as well?
Regular readers can answer that question: Debt Slavery. By indebting (nearly) everyone and everything across the Western world – and to absurd extremes – this financial vampire’s plan is to blood-suck everyone/everything through its “interest payments” on all these public/private mountains of unsustainable debt.
Note that much of our private debt has also been intertwined, ensuring that when the sovereign debt bubble implodes that all of the private debt bubbles will also get caught up in these dominoes of default. This should guarantee that (inevitable) Debt Jubilee extends to all private debt, as well as public debt.
The question is “when?” When will the debt-bubbles of Western nations which are obviously/hopelessly insolvent go “poof”, as humanity invokes yet another Debt Jubilee? With the banksters holding all these debts, and pulling all the strings; in strictly “mechanical” terms this paper-fraud of unprecedented proportions could theoretically go on forever.
With a near-infinite supply of paper funny-money, and near omnipotence in manipulating debt markets; the One Bank could prop-up this market into more wildly fraudulent proportions, meaning even more deeply negative interest rates. This brings us back, yet again, to the fable of “the Emperor’s New Clothes”.
When will some government, or regulatory body, or even widely-esteemed individuals call-out this blatant, gigantic fraud, by which the One Bank maintains its Debt Slavery (and thus its choke-hold over our puppet governments)? Sadly, the ingredient necessary for such an event is “integrity”: a commodity in radically short supply, throughout the corrupt Western world.