The US-based bond market is in tragic condition. All the bonds in US financial markets reek of rigged prices and inflated values. It is not a single bond sector, but rather all bond sectors that are in deep trouble, against a background of multi-year economic recession. The USTreasury Bonds, given the over $1.0 trillion in supply and widespread absence of buyers, deserves a 10% yield. The stolen missing $21 trillion amplifies the vacant value, from a grand crime scene. It is a wonder that investigator Professor Skidmore of Michigan State Univ has not been charged with financial terrorism. The USTBond market is teetering, kept afloat by overnight enormous slugs of fake money, which in early November was over $250 billion on a daily basis. If it was put onto the USFed balance sheet, on an increasingly frequent basis, then it is called QE. Better get real, and call it what it actually is – INFINITE Q.E. FOREVER. The Gold price is preparing the next launch platform.
The US corporate bond market is an avalanche waiting to happen, with potentially hundreds of $billions in bonds soon to be marked down as junk. They are on the verge of debt downgrades from their current fragile BBB rating. The junk bonds are becoming junkier by the month. However, the primary attention should be focused upon the Collateralized Loan Obligations (CLO). They are repackaged financial cow droppings and chicken dung, fashioned into tranches of wretched quality, but called AAA or something close. The 2006-2008 era saw a cousin fecal variety called CDO, even CDO squared instruments, all of which pursued and found their true zero value during the crisis. What exactly is the value of a CDO squared if the base has zero value? The answer is a faster heat seeking value that reaches zero in much less time.
The bond market crisis is finally in its middle stage, impossible to conceal from the overnight and POMO actions by the USFed. When an overnight credit extension for a desperately illiquid big bank morphs into an outright purchase, then placed on the USFed balance sheet, the activity qualifies at a Return to QE. Thus we observe the permanent open market operations recently evident. Given the high volumes, it qualifies at Infinite QE. Given the permanent policy announced by Chairman Powell last spring, it qualifies as Infinite QE Forever. The Gold market is watching. The Gold market is sniffing out the emerging crisis. The Gold market knows full well that a Systemic Lehman crisis is upon us. All the errors from the past decade have been repeated. The mortgage bonds were the subprime bond back before 2008. Today the USTreasury Bond is the global subprime bond, standing atop the Modern Monetary Theory pillars built from the Fascist Business Model. The bond market is like a gigantic building on fire, whose lapping flames are visible from 3 miles (5 kilometers) away, but which have summoned no fire trucks. Worse, the burning building is deemed normal and strong and healthy by the corrupted authorities. The monetary fire authorities are encouraging the masses to enter the burning building for safe haven. They will awaken, and migrate quickly to the Gold true sanctuary.
RISK OF NEGATIVE RATES
The whipping winds will carry the flaming matter to other financial markets when the bond yields begin to move below 1.0% and talk arrives of eventual negative rates. The reality of risk is far more powerful that the propaganda band boxes that spew out Modern Monetary Theory nonsense, verbal rubbish, and human droppings. Negative interest rate and bond yield cannot happen. The result will be massive rejection (dumping) of USTreasury bonds held in banking reserves, discharged in favor of gold bullion. Furthermore, the Indirect Exchange in funding large-scale Eastern Belt & Road projects already has created an environment of disfavor, discharge, and revolt. Negative rates would cause a third rail type of electrical repulsion.
Trump could crash the system by simply allowing the USTreasury Bond yields to diminish significantly, with the prospect of actual touching the negative pole. In response, watch the central bank rats bail from the ship en masse. In the last two months, warnings have come that rates cannot go negative. When the pole is approached, it starts the waterfall exodus from USTBond arena. In fact, when the short-term or 10-year bond yield approaches a negative rate, the resistance builds exponentially and will never allow an actual contact. Such is the phenomenon because that would mean the USD lantern would be extinguished, the King Dollar would suffer an immediate fatal heart attack, with almost no chance of resurrection. It is unclear whether President Trump will choose to actively use this method to force the Global Financial RESET. The disorder would be magnificent, enough to fill chapters in the annals of financial history. He might wish to overturn the elites in this manner, exploiting their arrogance and hubris, thus fomenting the stage to introduce the Gold Standard. It will arrive first in trade payment, next in sovereign bond guarantees, and finally in currency foundation. The biggest running question is whether the gold backing will be in digital form, thus ensuring integrity without the physical movement via trucks and planes.
Fashioning the future platforms is an arduous task. Everything else has failed, like sanctions, war, coalitions with puppets, financial theft, currency attacks, viruses unleashed, and economic sabotage. The other argument goes like this. Trump does not need to manage the collapse and ignition of the new system. It will evolve on its own, following the EU sovereign debt, following the Eastern initiatives with Gold-Oil-RMB contracts, following the Belt & Road multi-$trillion in projects collectively, following the spurn of the USTBond in massive dumping in favor of Gold. The Wall Street crew must manage a continued bond rally, one which never ends. They cannot encourage a bond exodus from lost principal, like from rising yields. The rally must continue even while bond yields are paltry, puny, and pitifully low. That means they must test the negative electrical pole, with risk of a violent global reaction. They must continue down toward the true zero bound. The slide on a slippery path built upon arrogance and unbridled power.