the dollar vigilante blog
US Treasury Bonds - The Biggest Bubble In History - About to Pop
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[Editor's Note: The following post is by TDV Editor-in-Chief, Jeff Berwick]
The US Treasury Bond market is the longest unbroken bull market known to the financial world. For more than 30 years it has trended higher in nominal US dollar terms.
Of course, it has been helped greatly by price fixed and market fixed, Ben Bernanke, who has now bought up more Treasuries, by far, than any other identifiable group, but didn't pay for them out of production; he just did it with the pressing of a button, using a pretty fat finger!
At the current rate, with the Federal Reserve buying up every penny of newly issued government debt in 2013, and then some, it won't be too much longer before the Federal Reserve owns more than China, Japan, the oil exporters and Caribbean bank centers combined.
Considering it is a group of private central bankers that can print money to buy as much of anything they want it should really have people raising some eyebrows! But, aside from the fraud involved, let's take a look at how the issuance of debt is following the exact path of a bubble.
STAGES OF A BUBBLE
First, there is the money printing. This is the distinguishing feature of a bubble, its ultimate cause; and there is no more direct form of this model than the central bank printing money to buy the government’s debt right out of the gate.
Jean-Paul Rodrigue is a Canadian most noted (in 2008) for his "bubble model", charting four "phases of a bubble". According to the model, while the "smart money" has purchased during the earlier "stealth phase", institutional investors begin to buy during "take off". Following media coverage, the general public begins to invest leading to steep rise in prices as "enthusiasm" and then "greed" kick in. "Delusion" precedes the peak.
Here is the progression, according to Rodrigue:
On a tip from good friend, Jeremy Martin, of the well-known Cambridge House conferences that we regularly attend, we decided to take a look at the entire US debt as plotted by the Heritage Foundation:
We then plotted Rodrigue's "bubble model" over top of the US debt data:
It's not perfect but it fits the model almost exactly. Where do you think Treasury bonds will head from here? TDV's Senior Analyst, Ed Bugos, is eyeing the Treasury Bonds for what could perhaps be the short of the century. He hasn't told subscribers to pile in yet, but I can tell from his twitchy finger over the "short" button on his online brokerage account that he is getting very close. Subscribe to TDV Premium for more expert information on when and how to profit from the coming collapse and protect yourself from the collapse with investments in gold, silver and precious metals stocks and foreign real estate.”
Anarcho-Capitalist. Libertarian. Freedom fighter against mankind’s two biggest enemies, the State and the Central Banks. Jeff Berwick is the founder of The Dollar Vigilante, CEO of TDV Media & Servicesand host of the popular video podcast, Anarchast. Jeff is a prominent speaker at many of the world’s freedom, investment and gold conferences as well as regularly in the media.
It's a funny thing about central banks, governments, goverment spending and economy-destroying monetary inflation. First of all, while the central bank is indeed a private cartel, it gets its monopoly power from the state. This is the very definition of corporatism or fascism...and it lies at the very heart of the economy because money is the signal carrier in the economic body. Mess with the money supply and interest rates by means of the decidedly non-market forces of state monopoly and the economic body will malfunction, eventually causing it to grow tumors and die.
So why have a central bank at all? Well, Keynesian economic theory was developed solely to justify central banks, inflation and state control. But since these things are, you know, wrong, Keynesian economics is as convoluted and unnecessarily complicated as Ptolemaic astronomy.
Ptolemaic theory, like Keynesianism, starts off on the wrong foot with a hilariously wrong premise: that the earth is the center of the universe. Keynesianism assumes the state is the center of the universe and that the state's existance is justified and its meddling with the economy is warranted.
The Keynesians would have you believe that a central bank can massage an economy into perfect growth, applying just the right pressure at the right time via interest rate manipulation and money and debt creation...that a central bank can maximize employment at any given time. But that notion doesn't even occupy the same continent as truth. What a central bank is really good at is creating money and then lending it to the government.
All new money created by the central bank -- without any preceding prodcutive activity or capital investment to back it -- leeches away purchasing power from existing stocks of money. So money supply inflation by central bank fiat is a sneaky tax. It transfers purchasing power out of the private sector pockets and funnels it to government coffers when the central bank uses it to buy government bonds.
Like most parasites, the government and central bank don't really care about the long term health of their host. The private sector and rising standards of living be damned! The state is always ready to expand itself to control every aspect of life in a collapsed economy.
We believe, however, that it will be a little different this time around, thanks to the internet. People are catching on and we may very well be on the threshold of another giant leap forward for humanity. But beating back the state and its bank is a long process...Transformational events like these are accomplished over generations. I'm saying it's a long way from here to there...
...In the meantime, there is also a lot of opportunity. You can do far more than just protect yourself from the predations of the central bank; you can profit enormously. TDV can help. Just click here to find out how.
Editor, The Dollar Vigilante