Bond bubble fears and why I took the biggest bet of my life [Telegraph]

If the bond bubble bursts, many pension savers will suffer

Last month I took the biggest bet of my life and, without wishing to overstate the downside, put 26 years’ savings at risk. Contrary to the conventional wisdom that people should raise their exposure to supposedly low-risk bonds and reduce shareholdings as they get older, I did the opposite and sold all the bonds in my company pension to buy shares.

That might be regarded as a recklessly risky thing to do for several reasons. First, bonds – a form of IOU issued by countries and companies – provide investors with a promise to pay income and repay their capital at fixed dates in the future, whereas shares give no guarantees at all.

Second, bonds have delivered higher total returns than shares for more than 20 years now. Third, bonds issued by the British Government, sometimes called gilts, are the basis of the annuities that most “defined contribution” or “money purchase” pensioners use to fund retirement.

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US Debt – Visualized in physical $100 bills

Treasury borrowed $24 billion in one day after Thanksgiving [RT]

(AFP Photo / Noel Celis)

(AFP Photo / Noel Celis)

The US Treasury raised the national debt by more than $24 billion on the day after Thanksgiving, increasing it to the alarming rate of about $211.69 per US household and bringing it to the highest level in history.

Topping off at $16.3 trillion, Friday’s debt was the highest on US record. The numbers skyrocketed after the Treasury Department took the day off on Thanksgiving, holding off on borrowing for just one day. But while Americans stayed home to say thanks and celebrate their annual feast, the economy grew worse overnight, CNS News reported.

On Black Friday, while shoppers were still digesting their big Thanksgiving meals, the voracious federal government scarfed down second, third, and fourth helpings of debt,” wrote John Hayward of Human Events.

When President Barack Obama first took office in 2009, the national debt was $10.6 trillion. Throughout the course of his presidency, it has increased by $5.7 trillion – the equivalent of nearly $50,000 per household.

During a 60 Minutes interview two months ago, the president responded to the alarming numbers, claiming that most of the debt was out of his control.

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2012 Is The Tipping Point – Results Are In, Bankers Lost [goldsilverworlds]

 

It is highly unlikely the Mayan predictions of the end of the world referred to the bankers’ world of credit and debt. Nonetheless, with only one month remaining until December 21, 2012—the end date of the Mayan 5,125 year Mesoamerican calendar—the concomitant end of the bankers’ 300 year ponzi-scheme of credit and debt should not be dismissed as mere coincidence.

The world has entered a paradigm shift of immense proportions; and the collapse of the bankers’ economic world is a part of that shift. The bankers’ credit fueled a 300-year global expansion which transformed the world. The bankers’ credit, however, has now become debt which increasingly cannot be repaid.

Economics is not rocket science although the arcane algorithms used by Wall Street banks to predict capital markets imply that intended conclusion. Modern economics, i.e. capitalism, is merely the current iteration of the supply and demand dynamic distorted by 300 years of credit and debt—a distortion that’s now about to end.

CAPITALISM FOR DUMMIES

debt vs credit capitalist gold silver experts

Prior to capitalism, the underlying economic dynamic was supply and demand. However, in economies fueled by the bankers’ debt-based banknotes, the relationship between credit and debt becomes equally, if not more, important than supply and demand.

GOLD, MONEY AND CREDIT

After gold was removed from the global monetary system in 1971 and after initial inflationary concerns were addressed in 1980, embedded constraints on monetary and credit growth no longer existed. The attendant rise in debt is noteworthy—as will be the consequences.

debt levels 1925 2012 gold silver experts

 

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Prison of Debt Paralyzes West [Spiegel]

In the midst of this confusing crisis, which has already lasted more than five years, former German Chancellor Helmut Schmidt addressed the question of who had “gotten almost the entire world into so much trouble.” The longer the search for answers lasted, the more disconcerting the questions arising from the answers became. Is it possible that we are not experiencing a crisis, but rather a transformation of our economic system that feels like an unending crisis, and that waiting for it to end is hopeless? Is it possible that we are waiting for the world to conform to our worldview once again, but that it would be smarter to adjust our worldview to conform to the world? Is it possible that financial markets will never become servants of the markets for goods again? Is it possible that Western countries can no longer get rid of their debt, because democracies can’t manage money? And is it possible that even Helmut Schmidt ought to be saying to himself: I too am responsible for getting the world into a fix?

 

The most romantic Hollywood movie about the financial crisis isn’t “Wall Street” or “Margin Call,” but the 1995 film “Die Hard: With a Vengeance.” In the film, an officer with the East German intelligence agency, the Stasi, steals the gold reserves of the Western world from the basement of the Federal Reserve Bank of New York and supposedly sinks them into the Hudson River. Bruce Willis hunts down the culprit and rescues the 550,000 bars of gold, which, until the early 1970s, were essentially the foundation on which confidence in all the currencies of the Western world was built.

 

Photo Gallery: The Debt Bomb

 

Creating Money out of Thin Air

Until 1971, gold was the benchmark of the US dollar, with one ounce of pure gold corresponding to $35, and the dollar was the fixed benchmark of all Western currencies. But when the United States began to need more and more dollars for the Vietnam War, and the global economy grew so quickly that using gold as a benchmark became a constraint, countries abandoned the system of fixed exchange rates. A new phase of the global economy began, and two processes were set in motion: the liberation of the financial markets from limited money supplies, which was mostly beneficial; and the liberation of countries from limited revenues, which was mostly detrimental. This money bubble continued to inflate for four decades, as central banks were able to create money out of thin air, banks were able to provide seemingly unlimited credit, and consumers and governments were able to go into debt without restraint.

 

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‘U.S. Per Person Debt Now 35 Percent Higher than that of Greece’

A chart from the Republican side of the Senate Budget Committee shows that “U.S. Per Person Debt [Is] Now 35 Percent Higher than that of Greece.”

“According to estimates from the International Monetary Fund, America’s total government debt will be $16.8 trillion by the end of the calendar year, compared to $441 billion for Greece,” the Republican side of the Senate Budget Committee explains. “On a per person basis, that means U.S. debt is $53,400 for every man, woman, and child, compared to $39,400 for every man, woman, and child in Greece. The disparity between per capita debt in the U.S. and Greece has grown 40 percent (roughly $8,400) since 2011. Now, U.S. per person debt is 35 percent higher than that of Greece, and is also higher than per capita debt in Portugal, Italy, or Spain (which together with Greece make up the so-called PIGS countries).”

 

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Gold Soars, Futures Plunge As Free Reign For Bernanke Appears Assured [Zerohedge]

S&P futures are now unchanged from Monday’s close – having lost 14 points from the close and over 18 from the highs. Meanwhile, gold is soaring and the USD is being sold. It would appear that as the odds of an Obama victory rises that the fiscal cliff reality becomes even more critical BUT given Bernanke’s four-more-years, they have no need to do anything about it since he will just monetize away… Gold realizes its the ‘stock’ and equities have already priced in the ‘flow’ but forgot to price in the fiscal cliff (as we have noted)… We assume Schumer will be on the phone first thing in the morning demanding moar doing his job…

S&P 500 are plunging… (moar Bernanke trumped by moar Fiscal Cliff reality!!)

 

and gold is soaring (moar Bernanke) – catching and surpassing stocks…

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