Cracks Forming in Bond Markets

By: The Voice of Reason |

After eight years of Obama’s disastrous economic policies, it’s understandable why Americans would want to be hopeful, and why they are consciously choosing to view the recent gains in U.S. equity markets as a harbinger of things to come under a Donald Trump presidency. Unfortunately, there is nothing to suggest the shifting sentiment toward the notion that Donald Trump can somehow fix our economy is warranted. In fact, it’s dangerous. Americans would be wise to heed a recent quote from Michael Snyder:

“Now is not a time to party.  Rather, it is time to batten down the hatches and to prepare for very rough seas ahead. All of the things that so many experts warned were coming may have been delayed slightly, but without a doubt they are still on the way. So get prepared while you still can, because time is running out.”

In the article below, Dr. Willie continues where he left off in an interview that was published roughly two weeks ago in a post titled, Dr. Jim Willie: Worst Bond Crisis in 15 Years, World Quickly Losing Confidence in the US. For your convenience, that interview can also be found at the very end of Dr. Willie’s article. There are a total of three videos contained within this post, each with a slightly different explanation of the same systemic problem for the U.S. economy: The collapse of the U.S. Dollar. In Dr. Willie’s article, he discusses the cracks that are beginning to show in the U.S. bond market, and what that means for the U.S. Dollar moving forward.

Dr. Willie’s message isn’t all that different than the one Bill Holter gave in an interview several days ago when he warned that every society, even the United States, is only a mere 72 hours away from total anarchy at any given moment. It’s also not that different from the message Peter Schiff gave two weeks ago when he was asked if the U.S. Dollar will collapse IF America defaults on its financial obligations.

In the first video below, Peter responds to the question about the collapse of the U.S. Dollar by saying, “The U.S. Dollar is going to collapse anyway,” but we might as well default now, because even though our creditors will get less than 100 cents on the Dollar of what we owe, they’ll get a lot more than if we keep printing more money and a Zimbabwe hyper-inflationary atmosphere takes over.

Until very recently in our country’s history, as the World Reserve Currency, the U.S. has always been able to finance our debt by selling U.S. Treasuries to foreign buyers, however the market for U.S. Treasuries has dried up in recent years, because the whole world knows the U.S. is bankrupt and cannot possibly repay the debt. Any nation that would lend to us would be crazy. In recent years, the Federal Reserve became the “lender of last resorts” because it kept expanding its balance sheet and buying up the U.S. Treasuries that no one else would, allowing the U.S. to keep fueling the debt… but those days are over.

At this point, the Fed can’t raise interest rates without bankrupting itself, bankrupting the U.S. government, and tanking the financial and housing markets. On the other hand, it can’t keep buying more debt and expanding its balance sheet without collapsing the dollar. In the article below, Dr. Willie goes into more detail…

Dr. Jim Willie writes:

Foreign US Treasury Bond dumping continues, and even accelerates. China and the Saudis are selling US Treasuries in a near panic. Foreign central banks liquidated a record $375 billion in US Government debt in the last 12 months. An American disaster lies in the making from debt saturation, debt overload, and debt dumping. It is all denied by the Washington mouthpieces and the Wall Street handlers, as they lie. The US Government debt default is within view, dead ahead.

One month ago in October tally, the Federal Reserve update of Treasuries held in custody revealed a frightening picture of foreign sales, big sales, even accelerated sales. The total amount of custodial paper had fallen to $2.805 trillion, the lowest since 2012. One month later, foreign central banks continued their relentless liquidation of US debt paper, as measured by the same custody account. Foreign central banks, sovereign wealth funds, reserve managers, and virtually every other official institution in possession of US debt paper, are liquidating their holdings at a frantic pace. They respond to domestic pressures with deficits to finance. They respond to the US fundamental situation, which resembles a Third World nation on a debt basis more so with each passing month. The next fiscal year for the US Government is actually incredibly astonishingly on pace to surpass the $2.0 trillion mark in the deficit. Obama goes out with a bang, with accolades and applause from his fawning fascist fold. His dimwitted dowdy devoted followers even cheer the rising ObamaCare premiums, which they fail to comprehend as rising costs.

See the monthly Treasury Intl Capital (TIC) data for the month of September, the latest reported month. In October the latest 12 months (called LTM) had a massive $343.0 billion in US Treasury sales by foreign central banks. It recorded the period from July 2015 to August 2016. One month later, using the update for the September month, the LTM in US Treasury sales has increased to a shocking level. A robust frightening record setting $374.7 billion in offshore central bank sales was observed. It recorded the period from August 2015 to September 2016. Over one third of a $trillion in US Treasuries sold in the past 12 months, a continuing trend. Yet it is not in the financial news, not given importance, not given emphasis. This is hemorrhage. This is abandonment. This is near panic dumping. This is a glaring red signal! Among the biggest sellers of US Government debt were China and the Saudis.

The great lie is that the bond buyers are from private demand, both foreign and domestic. The great lie is that the Federal Reserve is drawing down its balance sheet with selling to the private institutions. The great lie is that the recovery continues apace. All lies!! Bold lies!! The stark reality instead is that the many central banks are soaking up hundreds of $billions in official debt. The truth is that the US Federal Reserve, the Euro Central Bank, the Bank of England, and the Bank of Japan are all increasing their UST Bond holdings, soaking up the massive volumes of UST Bonds dumped on the international market. The truth is that the US Department of Treasury is ramping up the derivatives, engineering Interest Rate Swap machinery to create phony demand that soaks up the massive volumes of UST Bonds dumped on the international market. The central banks are stressed, while the machinery is strained. The new Trump Admin will have a major challenge to finance the $1 trillion infrastructure projects. The Federal Reserve might have difficulty in monetizing the costs.

Earlier this week, in an interview, forensic economist Bill Holter explained what really caused the U.S. equity markets to spring back to life after Dow Futures dropped by around 900 points in the immediate aftermath of Donald Trump being declared the winner of the Presidency. Based on what you heard above from Peter, and what Dr. Willie is saying, you can be sure the market’s sharp turnaround wasn’t a coincidence, and it wasn’t a post-election “Trump Bounce” as they media is calling it… 

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THE VOICE OF REASON is the pen name of Michael DePinto, a graduate of Capital University Law School, and an attorney in Florida. Having worked in the World Trade Center, along with other family and friends, Michael was baptized by fire into the world of politics on September 11, 2001. Michael’s political journey began with tuning in religiously to whatever the talking heads on television had to say, then Michael became a “Tea-Bagging” activist as his liberal friends on the Left would say, volunteering within the Jacksonville local Tea Party, and most recently Michael was sworn in as an attorney. Today, Michael is a major contributor to www.BeforeItsNews.com, he owns and operates www.thelastgreatstand.com, where Michael provides what is often very ‘colorful’ political commentary, ripe with sarcasm, no doubt the result of Michael’s frustration as he feels we are witnessing the end of the American Empire. The topics Michael most often weighs in on are: Martial Law, FEMA Camps, Jade Helm, Economic Issues, Government Corruption, and Government Conspiracy.