The global Central Banks, driven by their Keynesian lunacy, have induced the single largest misallocation of capital in history.
Nowhere is this clearer than in the bond market today.
Do the following sound normal?
1) Globally 45% of all Government bonds yield less than 1%.
2) Spanish and Italian bonds are at levels not seen since the Black Plague.
3) German bunds have NEGATIVE yields as far out as 8 YEARS.
4) The 10-YR US Treasury yield is at levels not seen since we were in a World War.
True, the world faces issues today… so it’s not odd for bond yields to be lower… but are those issues on par with a disease that wiped out 25%+ of Europe’s population… or the single largest military conflict in history?
The bond market is now over $100 trillion in size. The large banks have used a small portion of this (under 10%) as collateral to generate over $551 trillion in derivatives.
The bubble is so massive, that the Treasury department had survival kits delivered to the large banks around the country in anticipation of a crisis.
The NY Fed, similarly, is increasing the scope of operations in satellite office Chicago branch in preparation of a natural disaster or other eventuality could shut down its market operations as it approaches an interest rate hike…”
And then of course there are the big banks themselves… who lobbied Congress to the put taxpayers on the hook for their (the banks’) future losses on their gargantuan derivatives portfolios.
The simple truth is that the Central Banks bet the financial system on their academic theories… and have found that the system didn’t respond as they hoped. The economic “recovery” is the weakest in 80+ years… and that’s based on data that OVERstates growth.
The Fed’s own research shows that its QE programs only dropped unemployment by 0.13%… spending over $390,000 per new job created between the start of the crisis and the alleged end of the recession.
The ECB hasn’t done any better. It is not actively CHARGING depositors for sitting in cash. Several EU nations are now showing metrics on par with 3rd world countries.
And then there’s the Bank of Japan… which has induced a record high number of Japanese on welfare… and boosted the misery index to a 33 year high (mind you, this period of 33 years includes the collapse of the biggest asset bubble in Japan’s history… and people are MORE miserable NOW).
Another crisis is coming. And judging from the actions of the Fed and others to prepare (survival kits etc) it’s going to be far worse than the 2008 collapse.
Smart investors are preparing now.
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