5-May-13 World View -- Wall Street parabolic bubble

[John]

5-May-13 World View -- Wall Street stock market continues dangerous parabolic bubble

Libor banker fraud may be eclipsed by the ISDAfix fraud

** 5-May-13 World View -- Wall Street stock market continues dangerous parabolic bubble
** http://www.generationaldynamics.com/pg/ ... tm#e130505



Contents:
Wall Street stock market continues dangerous parabolic bubble
Libor banker fraud may be eclipsed by the ISDAfix fraud
Orthodox Jewish woman sues Lancome over makeup failure


Keys:
Generational Dynamics, Wall Street, Cyprus,
Libor, ISDAfix, Mike Taibbi,
Orthodox Jews, Oreal Lancome

[vincecate]

Long-time readers are well aware of the Generational Dynamics prediction that the world is headed for a major global financial panic and crisis, causing all bubbles to implode, including the stock market, commodity and gold bubbles.

The central banks have been printing trillions to buy up bonds and drive up bond prices. No other asset class has so clearly been artificially bubbled up. Even though Japanese government debt and deficits are totally out of control, and they will be doubling the monetary base in Japan over the next 2 years, and they are targeting 2% inflation, the interest rate on 30 year bonds is only 1.5%. I am sure that history will show this is an insane bubble. Shouldn't sovereign bonds be first on your list of bubbles?

[John]

> > Long-time readers are well aware of the Generational Dynamics
> > prediction that the world is headed for a major global
> > financial panic and crisis, causing all bubbles to implode,
> > including the stock market, commodity and gold
> > bubbles.

> The central banks have been printing trillions to buy up bonds and
> drive up bond prices. No other asset class has so clearly been
> artificially bubbled up. Even though Japanese government debt and
> deficits are totally out of control, and they will be doubling the
> monetary base in Japan over the next 2 years, and they are
> targeting 2% inflation, the interest rate on 30 year bonds is only
> 1.5%. I am sure that history will show this is an insane bubble.
> Shouldn't sovereign bonds be first on your list of
> bubbles?

I guess you're right, and a lot of people say the same thing. But I
have a hard time getting my head around a Treasury bubble, since the
price is set by the Fed rather than by the market.

But on the other hand (continuing to debate this with myself in my
head), sovereign bonds in Europe have certainly crashed, and that
happens when the central bank can no longer control the price of bonds
because the market doesn't want them any more.

But on the other hand, that's only because the countries in which
bonds have crashed are countries which don't have their own
currencies. But even for those countries, Europe has been somewhat
successful in keeping the prices of sovereign bonds up by the simple
means of having the ECB purchase them. The Fed can certainly do the
same thing at lot more easily, by continuing to "print" money, and in
the case of a global financial crisis, that's exactly what it would
do. So, the Treasury bond bubble would, in fact, not crash, since the
Fed would still be able to control the price.

And so (continuing the mental debate), it could be argued either way.
Yes, there's a bond bubble, because the Fed has been keeping the
prices of bonds artificially high, but it's not a bubble in the sense
that it won't implode, even if nobody except the Fed wants
U.S. Treasuries any more. So, bonds are in a bubble, but it's really
not the same kind of bubble. So should I have included bonds on
the list? I still really don't have an answer.

[vincecate]

And so (continuing the mental debate), it could be argued either way.
Yes, there's a bond bubble, because the Fed has been keeping the
prices of bonds artificially high, but it's not a bubble in the sense
that it won't implode, even if nobody except the Fed wants
U.S. Treasuries any more. So, bonds are in a bubble, but it's really
not the same kind of bubble. So should I have included bonds on
the list? I still really don't have an answer.

Yes, it is possible for the Japanese central bank to keep interest rates under 1% for government bonds. However, if they do that they have given up on limiting the amount of currency or controlling the value of the currency. So what will happen is that the Yen will keep going down and down. The net result is that even though the interest rates have not changed on the bonds in the last 6 months they have lost more than 20% of their value against international commodities. This is how sovereign debt bubbles pop when countries print their own money, not by defaulting or high interest rates but by the money losing value. But it really is a bubble. Just a bit more complicated in how it pops.