Posted on 08/17/2014 9:08:33 PM PDT by blam
August 17, 2014
DailyWealth
Dr. Steve Sjuggerud writes: A new record was set in Germany yesterday...
The interest rate on a 10-year government bond in Germany fell below 1%.
This number is shocking... Interest rates have never been this low in German history.
What does it mean?
Why would people agree to lend money to a government for 10 years with almost no return on that money?
What is the message that we should take from this?
Aren't things supposed to be getting back to "normal"? And doesn't "normal" mean something like this: By 2020, the Federal Reserve has short-term interest rates at 4%, and 10-year government bonds pay 5%-6% interest?
This type of "return to normal" is the script on Wall Street and on Main Street.
But that script is just plain wrong if 10-year interest rates in Germany are below 1%...
What we're experiencing is the financial storm that nobody is expecting.
I'm talking about DEFLATION – every central banker's biggest fear.
The guy with the right script here is Jim Rickards...
In his excellent book The Death of Money, Jim says, "The world is witnessing a climactic battle between deflation and inflation."
(snip)
(Excerpt) Read more at marketoracle.co.uk ...
And yet inflation keeps creeping up.
No kidding. Buy any meat lately. Need a bank loan to afford it.
I remember when the interest rate was 18%--that would be the early 80's.
Tell me about it. :o(
over $4 a pound for hamburg today. wth
Yup. I bought a house at 13% interest...my neighbor had 17% on his mortgage.
Hah, I bet that you are even over 35 years old!
.
Heeheehee.
Double that +.
Nonsense. We are witnessing the beginning of the end for the Federal Reserve notes. At what point is too much federal “borrowing” too much? Let me tell you. When productivity cannot keep up with inflation—and inflation does not mean prices going up at your favorite store or wherever you buy anything. INFLATION MEANS AN INCREASE IN THE MONEY SUPPLY, brought about by printing fiat money—more and more “money” chasing fewer and fewer goods.
As more regulations take hold, the producers—farmers, energy companies, producers of everything from cotton to coal, and everyone else, cannot keep up with the stranglehold of the government. They eventually say enough is enough. Taxation becomes so burdensome that no one can stay in business, and nothing is produced. Look at Zimbabwe, where they have gazillion dollar notes, but no one can find anything to buy as nothing is being produced.
A millionaire on an island is impotent—he cannot buy anything, as his money is worthless—there is nothing to be bought.
It is incremental, happening slowly with people not interested until nothing can be bought. It happens whenever a “federal bank” gets hold of the money supply and prints it into oblivion. You think the US is exempt? Think again. Janet Yellen is just the most recent incarnation of the power brokers of the “federal” bank. Janet, give me a call. Who do you think you are fooling? Answer: everyone.
* borrowed $50k @ 12% from my bank and loaned it to friend at 18%.
Under 1%. Is this the deflation you speak of?
Our bonds will look good by comparison, so this will help us.
What is your age after you adjust for inflation?
Actually nothing being bought may be partly because people have so much STUFF. Have you heard of the 700 mile yard sale? Also while wages at the top have skyrocketed, middle class pay has been virtually stagnent and the middle class pays the highest percentage of their earnings in taxes.
The 10-yr government bond yield in Japan is now around 0.5%, following an almost linear decline that started in 2006. The only way to rationalize buying 10-yr JGBs at 0.5% is believing that Japan will have a deflationary environment over the next decade and/or the central bank will absorb (or even monetize) the bulk of new issue bonds.
bump
I’ve been saying all along, since late 2007 when derivatives started to unravel due to the “unimaginable” adjustable rate, interest only liar’s loans defaulting at an unusually high rate: they’re going to try to inflate their way out of a disastrous deflationary crash and will eventually overshoot the mark. Nothing that has occurred since then has disproved this speculation.
“A millionaire on an island is impotent—he cannot buy anything, as his money is worthless—there is nothing to be bought”
well according to some- Gilligan and the Skipper can help!
Just a little levity
lol
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