How Berlin Forgot the Crimes of the Soviets
How Berlin Forgot the Crimes of the Soviets by Bill Bonner – International Man
Berlin is the testicle of the West.
When I want the West to scream, I squeeze on Berlin.
~ Nikita Khrushchev
“You’d think they would have learned something. They lived with communism for 45 years. They should know what it’s like.”
We are in Berlin at a business conference. A friend was explaining why progress in human affairs comes so slowly… if at all.
Fakey Capital Structure
We will come back to that in a minute. But first, we note that the mill is still grinding away. That is, despite all the bluff and blather about what a great economy we have, interest rates are rising… undermining the whole fakey capital structure.
We remind readers that the whole thing – including some $250 trillion worth of debt worldwide – rests on artificially low interest rates. If rates continue to rise, it is sure to fall down.
For the first time in seven years, this week, the 10-year Treasury note yield topped 3.25%. This number is probably the most important number in modern capitalism. It tells us the “risk-free” price of money… which is to say, it tells us the cost of borrowing money, or more abstractly, the price of the future.
The more you borrow today, the more time you will have to take away from tomorrow to pay it back. Eventually, you run out of time… and out of luck.
To put that in more concrete (or wood and plastic) terms, the higher your mortgage rate… the longer you have to work to pay for your house. CNBC has the latest:
The average rate on the 30-year fixed loan sat just below 4 percent a year ago, after dropping below 3.5 percent in 2016. It just crossed the 5 percent mark, according to Mortgage News Daily. That is the first time in eight years, and it is poised to move higher. Five percent may still be historically cheap, but higher rates, combined with other challenges facing today’s housing market, could cause potential buyers to pull back.
“Five percent is definitely an emotional level inasmuch as it scares prospective buyers about how high rates may continue to go,” said Matthew Graham, chief operating officer of MND.
The bulls say rates are moving up because the economy is so strong (people are borrowing and spending because they see things getting better). Maybe.
But we see no evidence of it. Instead, what we see is a business expansion at the end of its life expectancy… a bull market in stocks that is way past its sell-by date… and a huge pile of debt ready to come down on our heads as rates increase.
In short, we see a delusional economy that is quickly running out of time.
But let’s leave the economy and turn back to Berlin.
“It’s almost unbelievable,” continued our friend. “We went over to see Checkpoint Charlie [one of the best-known crossings between East and West Berlin] and the Holocaust monument. There’s a huge museum there that reminds us of how bad the Nazis were. You go there and you have no doubt that they were awful.