A 1648 Dutch water bond housed at Yale’s Beinecke Rare Book & Manuscript Library, written on goatskin, is still in effect. It still pays annual interest more than 367 years after it was issued.
In fact, a few years ago, Timothy Young, the library’s curator of Modern Books and Manuscripts, went to Amsterdam to visit the Dutch water authority and collect 12 years of interest on the bond — 136.20 euros in interest, or around $150.
If it had been a modern bond, Yale would have likely lost money to inflation or even owed money instead of earning interest.
- Japanese 10-year bond yields are at a mere .06 percent.
- German 10-year bond yields are negative 0.14 percent.
- Swiss yields are negative 0.31 percent.
- French 10-year yields are at -0.006 percent.
- The Netherlands has yields at -0.2 percent.
- Britain’s bond yields are 0.8 percent.
- The U.S. treasury 10-year yields are just up from their record lows, and stand at 1.616 percent as we write to you.
Being alert for danger in the system is as important as having food to eat.
If real trouble like a crisis appears, it will show up immediately in the U.S. dollar index or the bond market. The results can then show up in the equity markets, although these are manipulated as much as the value of the dollar.
In a free bond market, interest rates would most likely be skyrocketing. If that were to happen and it has come close more than once (remember long-term capital in 1998), I would normally fear exchange (currency) controls.
This means a sudden stop of all transfers of money out of the U.S. Also, there could be internal currency controls as well as travel restrictions. These things usually occur when systems begin to shake.
Today, the bond market does not operate freely, and so you must adjust your investment thinking.
The real economy
The Banksters have elevated themselves to emperor status with their control over the economy… except that the emperor has no clothes. It’s purely a confidence game.
“Central bankers” have created an environment where we will be in a constant cycle of booms and busts, with the Fed and its allies injecting “liquidity” into the system to “save” it. Instead of currency controls, you have currency out of control.
I agree with contrarian David Stockman who says the central banks flooding the world with credit are making the world poorer because “gains in real output and wealth depend upon efficient pricing of capital and savings. But the modus operandi of today’s central banking is to deliberately distort and relentlessly falsify financial prices…
“The essence of ZIRP and NIRP [zero interest rates and negative interest rates] is to drive interest rates below their natural … levels so as to induce more borrowing and spending by business and consumers.”
And where does the money people and institutions borrow come from? Central banks create it out of thin air!
Americans are very naïve and trusting people. They even believe politicians and bureaucrats. Being alert to possible crisis is very important in your financial planning.
We at The Bob Livingston Letter think that the U.S. is now beyond the Federal Reserve’s pie-in-the-sky “2 percent average inflation” taget, which is even worse than their former 2 percent target. With 2 percent average, the economy can go up and down for years and the Fed will be fone with it as long as it “averages” 2 percent. So who cares if inflation is now 6 percent?
In any case, the inflationary trend has been established by the world banking system and you can expect booms and busts for the foreseeable future.
This, of course, translates into an up commodity market, including a bull market in gold and silver and possibly other precious natural resources.
Before you bet the farm totally on inflation, put this in your mental computer for future reference. The U.S. dollar is the world reserve or senior currency. This means that if we see a tsunami economic collapse, the U.S. dollar could skyrocket on the international currency market most especially since the U.S. has superior world police power.
Surely by now you did not think the military industrial complex was in place for “regime change” and nation-building? No, dear reader. It is about the value of money. It has no value without our world police, i.e. the U.S. military.
This paragraph is intended to balance widespread inflationary psychology and fears of a “market crash.” Remember that markets can continue to rise because global banksters have perpetuated the illusion that equity markets, the stock markets, which are part of a system of markets more properly called “risk markets,” are perfectly safe.
Stocks are like money, they want you to think, and trusting Americans believe these banksters. These elites want you to think pouring money into stocks and funds is safe, easy, and risk-free because central bankers with their “liquidity injections” are subsidizing their speculative finance, which drives the markets to even greater but artificial highs, making the rich richer.
History shows us what happens when people realize the stock market boom they are experiencing is purely speculative. You get a violent crash to the downside.
When the speculative credit, debt and stock bubbles are pierced, it could take decades to unwind.
Are we headed into a bust cycle?
For a clue, look at where some huge investors are putting their money. Doug Noland, who also writes on David Stockman’s site, wrote that “Tens of trillions of sovereign debt have become trapped … as central bankers, derivative traders, speculators and safe haven buyers all battle to procure precious bonds.”
Even if inflation were really only around the official 2 percent average target, investing in U.S. and other low yield bonds means you are in effect paying the government to hold on to your money. As for the bonds with negative yields, the market value of the Bloomberg Barclays Global Negative Yielding Debt Index rose to more than $18 trillion.
Why would so much money be chasing bonds that one has to pay to own, if they weren’t considered safer than other investments? Even a tiny increase in interest rates would cause almost two and a half trillion dollars in losses. But it’s still not dissuading trillions more in bonds from being bought.
Anybody who knows anything about the Federal Reserve knows they believe that by lowering interest rates and printing money that they can avoid a recession/depression. They also believe that lower interest rates and new money can start a bull market in stocks.
Absolutely not so in the long run! A bear market in stocks can wipe out money faster than the Fed can create it. Ask Japan.
I remind you that stockbrokers, the government and its media, and the big banks are always trying to turn sentiments toward dollars and heavily against gold and other commodities. You will have to go against this if you want to profit from them in the coming months. If you want to be a financial success, you never go with the public, but just the opposite. You must do what most people cannot.
written by Bob Livingston
