you do realise bond yields are gona be pushed to near 0 soon yeh?
I wonder how N Rothschild feels now about the Bond markets, Greece's 50% haircut, the safety of the Bond market etc ectc etc.
I am still laughing over his ill-informed rant about "bond yields being pushed to near zero."
It has nothing to do with the government pushing yields down, because they, the Government, is quite unable to hold yields down for long, given that the yield is simply a measure of risk.
Recently yields in Greece soared to 150% + indication the market believed that there was a greater than 100% chance of a default. (Check the yields on Italian Bonds ... surprise awaiting!)
It happened as the yield predicted it would, only the cunning ECB and the EFSF engineered the slow-burn so that Greece technically avoided a default, and thus made any CDS (the Credit Default Swaps Insurance on a default) null and void. Banks win again - no payout on the insurance against the default.
From Greg Canavan in Sydney: Australian Financial Market News | The Daily Reckoning Australia
-- As far as can kicks go, this one was not a bad effort.
The question you should ask, though, is how long it
will take the market to accept this latest European
bailout still doesn't solve any fundamental problems.
It is just a shameless attempt for gain without pain.
-- Let's look at a few of the details. Greece will get a
50 per cent haircut on its debt?
Not so fast.
Their total debt load is a mind-boggling €350 billion.
This includes around €70 billion in loans from the IMF etc.
and about €75 billion that the European Central Bank (ECB)
has kindly purchased from the private sector.
-- These amounts will not be subject to a haircut, so Greece is
still on the hook for this debt.
That leaves around €200 billion subject to the 50 per cent
reduction...which actually means it's only a (roughly)
30 per cent trim (we wouldn't even call it a haircut).
-- Given Greek pension funds and banks own a decent chunk
of this outstanding amount, it's easy to see who's really
paying for this. Banks 1 Greece 0.
The whole point of this post is to point to the fact that many supposedly knowledgable members of the financial world and the public at large, do not fully understand what is going on.
And that includes me, though I remain an interested observer.
If this can occur with Greece, who was bankrupt and remains bankrupt, what hope is there for Europe and The USA generally?
The whole system needs reforming. It may have been painful, but would it not have been better to allow the collapse of the system when Lehman Bros went down, instead of wasting further assets in propping up the whole shaky house of cards?
Trillions of dollars have been spent supporting, stimulating and bailing-out, yet the mess is no further advanced towards stability and security than it was before the collapse of Lehman.
The problem is exactly as I highlighted with N Rothschild - he didn't understand that rising bond yields are a sign of rising risk, and as we shall shortly see, rising inflation everywhere.
The first thing we shall see is a recovery in the commodities markets, and Gold getting into a decent rally. This might occur because of what happened in Greece. Those who have money to put in bond markets are worried now, and are casting around for "somewhere safe" to put their cash. The commodities markets are about the only place left - where you get something tangible for your buck.
Unfortunately a rise in commodities only exports inflation to those who are forced to pay the higher prices, and food riots in the North of Africa, with the follow-on effect of bringing down Mubarak in Egypt, and Benali in Tunisia, and lately Gadaffi in Libya. The Arab spring is the movement we see today, but the revolutions began simply because of rising food prices, as a result of rising commodities.
If this continues, we may indeed see hyperinflation in the west, but we will see more blood in the Middle East, and more food riots and revolutions in third world and poverty-bound nations. This is what is feared more than any deflation, and is the reason why hyperinflation is to be avoided at all costs.
Unfortunately, the only way out for the western world, and vicariously, capitalism, is to hyperinflate-away the debt.
And there is no way that a slow-burn can be orchestrated in that. Human greed caused it, and human greed and self-interest will ensure that "slow-and-controlled" inflation will not happen. It will be hyperinflation until the final collapse. After that, who knows?
As for the question: Could the Weimar Hyperinflation Happen Again in America?
I think we all feel that answer in our water.
The question will have it's answer, as it turns from "could" to "when will" to "what the ..."
