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The Bankers' Last Arena
In September 2012, in my article Gold versus
Bonds, I wrote: In the end game, the bond market will be
capitalism's final resting place .when capital markets expand, the action
is in the equity markets; when capital markets contract, bond markets are
where the action is.
On June 7, 2015, The Financial Times' John Authers observed: This
has been a very dramatic week.. The real action was in the bond markets.the
cost of borrowing, the cost of money within Germany over the long term more
than doubled in the space of four trading days.
 
On the same day, CNNMoney warned: Pay Attention To The Chaos In The
Bond Market - Bond Market Selloff Continues
That hissing sound you just heard is more air coming out of the bubble
in the global bond market. From Germany to the US, fixed income prices tanked
last week, sending yields way up.Investors are yanking cash out of the fixed
income market. Government bonds experienced a sixth-straight week of outflows,
according to Bank of America Merrill Lynch. Emerging market debt, a big
beneficiary of extremely low U.S. interest rates, suffered the biggest
outflow in nearly five months.
The same week, Michael Snyder in Investors Start To Panic
As A Global Bond Market Crash Begins, asked:
Is the financial collapse that so many are expecting in the second half
of 2015 already starting?
Many have believed that we would see bonds crash before the stock
market crashes, and that is precisely what is happening right now. Since
mid-April, the yield on 10 year German bonds has shot up from 0.05 percent to
0.89 percent. That much of that jump has come this week. Just a couple of
days ago, the yield on 10 year German bonds was sitting at just 0.54 percent.
And it isn't just German - bond yields are going crazy all over Europe. So
far, it is being estimated that global investors have lost more than half a
trillion dollars, and there is much more room for these bonds to fall. In the
end, the overall losses could be well into the trillions.
And on June 11th, FXStreet wrote: .government bond prices
across the globe continue to tank, sending yields higher, leading to a
cumulative loss of [$1.2 trillion] in last three months.The bond route is
spearheaded by the German bunds..A similar move is seen in French, Italian
and Spanish yields.In Asia, the picture is similar to the one seen in the
Eurozone. Yields have jumped in Indonesia..in South Africa..in Turkey..in
Mexico..and in Australia.
Under the topic, THE END GAME AND THE COMING PANIC IN THE BOND
MARKET, in Gold versus
Bonds(September 2012) I wrote:
The bond matadors' 30-year run of luck is running out. Interest rates
have fallen for 30 years making previously-issued bonds more valuable. But,
today, with US Treasury debt close to 0 %, interest rates can't go lower and
bond valuations can't continue to rise.
We are moving into the end game, the grand denouement of credit and
debt-based markets, the grand finale of the debt super-cycle, the crack-up
boom, the blow-off Ludwig von Mises predicted would happen as a result of
constantly expanding credit.
David Stockman [Reagan's former budget director] and outstanding
observer of America's problems in the end game..was asked [May 2012]:'What
catalyst could bring the end game to a final resolution?'
David Stockman: I think the likely catalyst is
a breakdown of the U.S. government bond market. It is the heart of the fixed
income market and, therefore, the world's financial market.
Because of Fed management and interest-rate pegging, the market is
artificially medicated. All of the rates and spreads are unreal. The yield
curve is not market driven. Supply and demand for savings and investment,
future inflation risk discounts by investors-none of these free market forces
matter. The price of money is dictated by the Fed, and Wall Street merely
attempts to front-run its next move.
As long as the hedge fund traders and fast-money boys believe the Fed
can keep everything pegged, we may limp along. The minute they lose
confidence, they will unwind their trades.
On the margin, nobody owns the Treasury bond; you rent it. Trillions of
treasury paper is funded on repo: You buy $100 million (M) in Treasuries and
immediately put them up as collateral for overnight borrowings of $98M. Traders
can capture the spread as long as the price of the bond is stable or rising,
as it has been for the last year or two. If the bond drops 2%, the spread
has been wiped out.
If that happens, the massive repo structures-that is, debt owned by
still more debt-will start to unwind and create a panic in the Treasury
market.
THE PANIC IS BEGINNING
PARADIGM SHIFTS AND INSTITUTIONAL FAILURE
When paradigms shift, what was once believed true is no longer
believed, new questions take the place of old answers and institutional
failure becomes commonplace when traditional solutions no longer provide the
requisite answers.
We are now in the final stage of the end game. I described this
process inSeptember 2008 in my article Gold
& The Collapse of Paper Money. In that article, I referred to Professor
David Hackett Fischer'sThe Great Wave, Price Revolutions and the Rhythm
of History (Oxford University Press 1996), a seminal work that
places today's economic crisis in a far greater and far more significant
context:
According to Professor Fischer, waves of rising prices have interrupted
long periods of stability throughout history. These great waves are often
accompanied by unexpected disasters, extreme social upheaval and always end
in economic collapse.
Such great waves last from 80 to 160 years and their appearance spells
the end of epochs and eras. Great waves marked the end of the feudal era, as
it did the end of the renaissance and the enlightenment; and soon, the
current great wave that began in 1896 will end the era of "Victorian
equilibrium", an era that began with the reign of England's Queen
Victoria.
During each great wave throughout history: .Food and fuel led the
upward movement. Manufactured goods and services lagged behind. These
patterns indicated that the prime mover was excess aggregate demand,
generated by an acceleration of population growth, or by rising living
standards, or both.
. Prices went higher, and became increasingly unstable. They began to
surge and decline in movements of increasing volatility. Severe price-shocks
were felt in commodity movements. The money supply was alternately expanded
and contracted.
Financial markets became unstable. Government spending grew faster than
revenue, and public debt increased at a rapid rate.Wages, which had at first
kept up with prices, now lagged behind. Returns to labor declined while
returns to land and capital increased. The rich grew richer. Inequalities of
wealth and income increased. So did hunger, homelessness, crime, violence,
drink, drugs, and family disruption.
.This was a time of lost faith in institutions. It was also a period of
desperate search for spiritual values.Young people, uncertain of both the
future and the past, gave way to alienation and cultural anomie.Finally,
the great wave crested and broke with shattering force in a cultural crisis
that included demographic contraction, economic collapse, political
revolution, international war and social violence.
Today, another great wave is cresting and, once again, is about to break,
resulting in a cataclysmic crisis of demographic contraction, economic
collapse, political revolution, international war and social violence
that will end the current paradigm, clearing the way for the new and better
paradigm to come.
About these cataclysmic and transformative crises, Professor Fischer
writes: Each crisis improved the condition of ordinary people. It
has also enlarged ideas of human dignity, freedom, and the role of law. This
tendency has become more powerful in each successive wave.
The world's oldest book, China's I Ching (The Book of Changes) offers
a perspective on today's crisis that supports Professor Fischers' ultimately
positive outlook:
The Flood, hexagram 59: Being swept by a flood is blessed.What seems
like a disaster proves to be a blessing. The protagonist is inundated by a
rush of water, an irresistible and apparently destructive force. But this
destructive force proves beneficial, sweeping him up to a height he could not
have reached on his own.
Rediscovering the I Ching, Greg Whincup, Doubleday & Co. 1986
We asked for signs
Signs were sent
But then we wondered
What they meant
THE BIG RESET
The
Big Reset: War on Gold and the Financial Endgame (2014) by Willem
Middlekoop tells the history of gold in a remarkably clear and insightful
manner. But Middlekoop's proferred conclusion is but the central bankers'
currently hoped-for wet dream in an end game they don't control.
Middlekoop's powerfully conclusive writing implies the success of the
bankers' 'big reset', i.e.a new global reference currency, is virtually
assured, a fait accompli, needing nothing more than its implementation
to make the next version of the bankers' bogus banknotes a viable reality.
Such a monetary reset, if successful, would give new life to the bankers'
now dying paradigm of credit and debt thereby allowing bankers to continue
living like parasites off the indebting and productivity of others.
The idea that humanity controls its destiny, however, is hubris, a modern
superstition, a bastard byproduct of the now fading industrial age. That we
are responsible for our destiny-the inexorable result of our free will-does
not mean we control what that destiny will be.
Power is no more control than
credit is money
This is as true for bankers as it is for humanity. It is a truth, however,
that bankers do not yet understand; for if they did, they would not behave as
they do.
In The Great Wave, Price Revolutions and the Rhythm of History,
David Hackett Fischer writes: In the United States problems of economic
understanding have been compounded by the effect of economic prosperity. The Japanese
in WWII spoke ruefully of 'shoribyo' or 'victory disease'. The Greeks called
it 'hubris, and thought it always ended in the intervention of the goddess
Nemesis. That lady makes her appearance when wave-riders begin to believe
that they are wave-makers, at the moment when the great wave breaks and
begins to gather its energy again.
THE MOTHER OF ALL PARADIGM SHIFTS: THE UNIVERSAL RESET
In May 2007, sixteen months before the 2008 financial crisis, I wrote in Subprime
America infects Asia and Europe:
It's spring 2007 and the sun is shining in the US, backyard BBQs are
being cleaned in anticipation of summer's use. A severe financial crisis,
however, is in the offing; a crisis as unexpected as the Golden State
Warriors' last minute streak to the NBA playoffs.
An unexpected financial crisis, however, will be much more
consequential than Don Nelson's magical resurrection of the Warriors' NBA
hopes. There, at least, the Warriors will have a fighting chance. But because
most people don't know a financial crisis is in progress, they will have
little chance of survival. This summer, America's subprime CDOs are coming
home to roost, and not just to the US.
[Note: Six weeks after I wrote those words, on June 23, 2007, The New York
Times reported: Bear Stearns pledged up to $3.2 billion in loans yesterday
to bail out one of its hedge funds that was collapsing because of bad bets on
subprime mortgages.]
The unexpected financial crisis I predicted in 2007 isn't
over.Today, in synch with David Hackett Fischer's great wave, it, too, is
about to crest and crash bringing to an end all that credit created.
The underlying crisis, however, isn't about bond markets, excessive levels
of credit and aggregate debt or the inability of central bankers to revive
economic growth. Today's crisis is part of a far larger paradigm shift-a
universal reset that is about to transform humanity and life on Earth
In 1981, in Buckminster Fuller wrote:
Humanity is moving ever deeper into a crisis which has no precedent.
It is a crisis brought about by evolution being intent on completely
integrating differently colored, differently cultured, and intercommunicating
humanity, and by evolution being intent on making integrated humanity able to
live sustainedly at a higher standard of living for all than has ever been
experienced by any.
This unprecedented crisis now in motion includes cataclysmic earth
changes, e.g. record heat, record cold, record rains, floods, drought,
eruptions and earthquakes. The universal reset, needed and timely as it is,
will not be easy nor will survival be assured.
The outcome, however, is preordained. A better world is coming.
Today's accelerating earth changes are noted daily on my news blog at www.drschoon.com. My current Dollars
& Sense video is titled, US
Politics: The Illusion & The Truth, i.e. Politics for Dummies
& the Dispossessed, seehttps://youtu.be/TtldcZrayz0.
Buy gold, buy silver, have faith.
Darryl Robert Schoon
www.drschoon.com
www.survivethecrisis.com
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