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We Are Being Set Up For Higher Interest Rates, A Major Recession And A Giant Stock Market Crash

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bear-market-bull-market-public-domainSince Donald Trump’s victory on election night we have seen the worst bond crash in 15 years.  Global bond investors have seen trillions of dollars of wealth wiped out since November 8th, and analysts are warning of another tough week ahead.  The general consensus in the investing community is that a Trump administration will mean much higher inflation, and as a result investors are already starting to demand higher interest rates.  Unfortunately for all of us, history has shown that higher interest rates always cause an economic slowdown.  And this makes perfect sense, because economic activity naturally slows down when it becomes more expensive to borrow money.  The Obama administration had already set up the next president for a major recession anyway, but now this bond crash threatens to bring it on sooner rather than later.

For those that are not familiar with the bond market, when yields go up bond prices go down.  And when bond prices go down, that is bad news for economic growth.

So we generally don’t want yields to go up.

Unfortunately, yields have been absolutely soaring over the past couple of weeks, and the yield on 10 year Treasury notes has now jumped “one full percentage point since July”

The 10-year Treasury yield jumped to 2.36% in late trading on Friday, the highest since December 2015, up 66 basis point since the election, and up one full percentage point since July!

The 10-year yield is at a critical juncture. In terms of reality, the first thing that might happen is a rate increase by the Fed in December, after a year of flip-flopping. A slew of post-election pronouncements by Fed heads – including Yellen’s “relatively soon” – have pushed the odds of a rate hike to 98%.

As I noted the other day, so many things in our financial system are tied to yields on U.S. Treasury notes.  Just look at what is happening to mortgages.  As Wolf Richter has noted, the average rate on 30 year mortgages is shooting into the stratosphere…

The carnage in bonds has consequences. The average interest rate of the a conforming 30-year fixed mortgage as of Friday was quoted at 4.125% for top credit scores. That’s up about 0.5 percentage point from just before the election, according to Mortgage News Daily. It put the month “on a short list of 4 worst months in more than a decade.”

If mortgage rates continue to shoot higher, there will be another housing crash.

Rates on auto loans, credit cards and student loans will also be affected.  Throughout our economic system it will become much more costly to borrow money, and that will inevitably slow the overall economy down.

Why bond investors are so on edge these days is because of statements such as this one from Steve Bannon

In a nascent administration that seems, at best, random in its beliefs, Bannon can seem to be not just a focused voice, but almost a messianic one:

“Like [Andrew] Jackson’s populism, we’re going to build an entirely new political movement,” he says. “It’s everything related to jobs. The conservatives are going to go crazy. I’m the guy pushing a trillion-dollar infrastructure plan. With negative interest rates throughout the world, it’s the greatest opportunity to rebuild everything. Ship yards, iron works, get them all jacked up. We’re just going to throw it up against the wall and see if it sticks. It will be as exciting as the 1930s, greater than the Reagan revolution — conservatives, plus populists, in an economic nationalist movement.”

Steve Bannon is going to be one of the most influential voices in the new Trump administration, and he is absolutely determined to get this “trillion dollar infrastructure plan” through Congress.

And that is going to mean a lot more borrowing and a lot more spending for a government that is already on pace to add 2.4 trillion dollars to the national debt this fiscal year.

Sadly, all of this comes at a time when the U.S. economy is already starting to show significant signs of slowing down.  It is being projected that we will see a sixth straight decline in year-over-year earnings for the S&P 500, and industrial production has now contracted for 14 months in a row.

The truth is that the economy has been barely treading water for quite some time now, and it isn’t going to take much to push us over the edge.  The following comes from Lance Roberts

With an economy running at below 2%, consumers already heavily indebted, wage growth weak for the bulk of American’s, there is not a lot of wiggle room for policy mistakes.

Combine weak economics with higher interest rates, which negatively impacts consumption, and a stronger dollar, which weighs on exports, and you have a real potential of a recession occurring sooner rather than later.

Yes, the stock market soared immediately following Trump’s election, but it wasn’t because economic conditions actually improved.

If you look at history, a stock market crash almost always follows a major bond crash.  So if bond prices keep declining rapidly that is going to be a very ominous sign for stock traders.

And history has also shown us that no bull market can survive a major recession.  If the economy suffers a major downturn early in the Trump administration, it is inevitable that stock prices will follow.

The waning days of the Obama administration have set us up perfectly for higher interest rates, a major recession and a giant stock market crash.

Of course any problems that occur after January 20th, 2017 will be blamed on Trump, but the truth is that Obama will be far more responsible for what happens than Trump will be.

Right now so many people have been lulled into a sense of complacency because Donald Trump won the election.

That is an enormous mistake.

A shaking has already begun in the financial world, and this shaking could easily become an avalanche.

Now is not a time to party.  Rather, it is time to batten down the hatches and to prepare for very rough seas ahead.

All of the things that so many experts warned were coming may have been delayed slightly, but without a doubt they are still on the way.

So get prepared while you still can, because time is running out.

 
  • democratsAREracist

    liberals are racist garbage

    • df NJ

      You criticize and hate in other people what you do not like about your own character.

      • democratsAREracist

        LMAO, liberals are racist garbage. like you, they think they actually know something useful, LMAO

        • df NJ

          Well obviously you are Republican which means all your opinions are facts.

          • Mike Smithy

            WOW, I haven’t seen the Democrats this angry since the Republicans freed their slaves.

          • democratsAREracist

            you own slavery, kkk , jim crow laws and a lifetime history of racism
            obviously……………

      • Darwin

        It doesn’t matter how hard it is you try, you just cant enlighten a tape recorder.

    • nick

      You are such an illiterate moron. I have no party afilliation as the corruption runs deep and is intertwined with both parties. But it is more than obvious that the neo-right, alt. right, KKK, and anyone that has supported bombing and killing people because of the color of their skin, their nationality, or religious beliefs(I am agnostic, sprinkled with some buddhism), lean heavily to the right. The KKK gave their endorsement to Trump.
      Do you know what critical thinking is, or are you just the usual repeater, information goes in your ear, out your mouth, and your brain obviously is just a tool to keep you breathing.

      • democratsAREracist

        kkk – created by democrats
        slavery – democrats
        jim crow laws
        blm

        endless list, liberals are beneath excrement, even they know it

        • socalbeachdude

          Yep.

      • socalbeachdude

        There are fewer than 5,000 KKK members in the US which is a country of more than 324 million citizens and the KKK is utterly irrelevant.

      • Gay Veteran

        “…he KKK gave their endorsement to Trump….”

        did they?
        did the Communist Party endorse Hillary?

      • MikeAZwildcats

        Muslims nations are ratholes because muslims live there. Mexico is a rathole because mexcians live there. Africa is a rathole because blacks live there.

  • Cinderella Man

    Yep we are in big trouble…I never thought Trump getting elected was going to solve all our economic woes they have been keeping this economy alive with spit and glue for years I honestly don’t know why it hasn’t collapsed already except for maybe powerful forces didn’t let it crash on Barry’s watch for political reasons regardless this will not be Trump’s fault..this is years of economic irresponsibility that has finally come home to roost..I will never let my guard down I for one am prepared and always will be

    • MIchael in Chicago

      Hope for QE4 and helicopter money are the only two reasons I can think of why the party has not ended yet.

      • df NJ

        Helicopter money would be amazing! I just want to see them do it once just to see it.

        • socalbeachdude

          Nope, and obviously the Federal Reserve NEVER HAS AND NEVER WILL “GIVE” MONEY TO ANYONE. They are a WHOLESALE CENTRAL BANK and they have nothing whatsoever to do with any direct dealings with the public.

          You are talking FISCAL STIMULUS and NOT MONETARY POLICY and that is not something any central bank ever does. Moreover, the US government itself is WAY BEYOND BANKRUPT and has more than $19.5 trillion in federal debt and had to borrow more than $1.4 trillion in Fiscal 2016 which ended on 09/30/2016 just to attempt to keep its books functioning.

          • goldminer

            True. The fed has nothing to do with helicopter money. But they and the central banks will loan the money to the US treasury. So they can give out helicopter money tax rebates to everyone. That is how helicopter money is distributed. The FED does not write the check. The government does.

          • retired22

            they don’t lend money,they lend currency which is just bankers I.O.U.’s

          • socalbeachdude

            Laughably false.

          • socalbeachdude

            What you are talking about is FISCAL STIMULUS not monetary policy / stimulus and there is no such thing as “helicopter money” at all as any such fiscal stimulus would just massively worsen the federal debt and deficit problem causing interest rates on US Treasuries to rise even faster which US government revenues would fall by whatever amount that stimulus was.

        • Barry Soweto

          Ain’t no party like a helicopter money party
          because a helicopter money party don’t stop !

      • socalbeachdude

        The Federal Reserve versions of QE (Quantatative Easing) fully ended on October 31, 2014, and there will be no further QE. All of those QE funds were merely used to purchase EXISTING SECURITIES consisting of US Treasuries and MBS instruments from member banks with the proceeds deposited into the reserves accounts of those member banks inside the Federal Reserve which is where those funds remain. QE has no impact whatsoever on the US economy as it was a CLOSED LOOP series of transactions with none of those funds going anywhere other than into the reserves accounts of those member banks inside the Federal Reserve where their earn IOER (Interest On Excess Reserves) and where those funds have always remained parked.

        • retired22

          Why in the world do we need a consortium of private,for profit,banks to own America’s financial future & flow/price of credit?
          Even if we desired a debt based financial system,we could do it through the Treasury Department with no need for the FED.

          • socalbeachdude

            That would be unthinkably disastrous as the US Treasury is what has run up the $19.5+ federal debt in conjunction with Congress. If they had no restraints in printing money, that debt would rapidly soar to over $50 trillion with no end in sight. Is that what you really want to see?

          • retired22

            The executive branch & Congress are supposed to control the Treasury Dept.
            Are you saying that a branch of the elected government is not controlled by that government,…it is controlled by the Central Bank?
            If the Central Bank controls the Treasury then it controls America’s flow of credit in which case it controls America & it’s elected government!

          • socalbeachdude

            A President has no powers to change an ACT OF CONGRESS unilaterally and the Federal Reserve System was established by an ACT OF CONGRESS CALLED THE FEDERAL RESERVE ACT and Congress has the EXCLUSIVE POWER to amend or abolish that Act.

            I would suggest that you read and attempt to comprehend the Federal Reserve Act at:

            https://www.federalreserve.gov/aboutthefed/fract.htm

          • jamesgwolfe

            If the US had control of the money there would be no debt, only inflation. The world bankers took over the US in 1913 when the traitor Wilson turned our future and enslavement over to them. The fed must be abolished and the debt repudiated. That is the only way it will ever get fixed if it is possible at this point. Also there must be the restraint of a gold standard reinstated.

          • socalbeachdude

            The Federal Reserve was established by CONGRESS and the FEDERAL RESERVE ACT in 1913 and has served the US extremely well throughout its 103 years of existence and will do the same over the next 100 or 200 years or more.

            All currencies in the world are fully backed by the current and future labor and productivity and assets of the citizens of their issuing governments. And that is the core problem that the world is now facing as most governments around the world have ESSENTIALLY RENDERED INSOLVENT THE NET WORTH OF THEIR CURRENCIES BY VASTLY OVERSPENDING BEYOND THEIR MEANS and there are severe consequences for doing so.

            The US dollar, like all currencies, is backed by the current and future assets and labor and productivity of the citizens of the issuing government which is VASTLY MORE VALUABLE than some little junk commodity such as gold or silver.

            The so-called “gold standard” was a very brief 60 year experiment from 1873 until 1933 which proved to be a VERY STUPID AND ABYSMAL FAILURE at which point it was thrown into the garbage bin of the most stupid notions in the history of the world and incinerated.

            The gold standard was TOTALLY DISCARDED DOMESTICALLY BACK IN 1933 as that brief 60 year failed experiment was an exercise in utter absurdity and the US economy had totally outgrown any use whatsoever for a little thingy commodity such as gold in relationship to its currency.

            Little niche collectible fungible commodity metals such as gold and silver have NO FINANCIAL RELEVANCE whatsoever in today’s modern electronic currencies and economies.

            The US long used a “silver standard” until that was discarded around 1870 and briefly replaced with the so-called “gold standard” which was totally discarded domestically in the US in 1933 as an entirely failed experiment. No currency can be limited to the production of some irrelevant “thingy” commodity such as gold or anything else when the population of that currency’s country is vastly expanding as was the case of the US by the 1930s.

            Nixon did not “abandon gold” at all. Nixon merely ended the Bretton Woods currency fixed exchange rate agreement which had been in force from 1944 to 1971.

            Nixon had nothing to do with the “gold standard” in the US which had long ago been TOTALLY DISCARDED BY THE US DOMESTICALLY back in 1933 and only a tiny shred of gold nonsense was even left in the form of international bank transaction convertibility which is what was discarded in 1971.

            Artificially constraining the growth of money supplies while the population is growing substantially CAUSES DEPRESSIONS and causes countries to fail economically.

            The most EGREGIOUSLY INSOLVENT COUNTRY IN THE WORLD TODAY IS JAPAN with government debt at around 250% of the GDP of Japan while the ratio in the EU is around 100% and in the US around 105%.

            Are you not aware that the total value of all gold ever mined is less than $7 trillion which is less than 1% of the world’s total assets of around $800 trillion? And of that total $7 trillion in currently absurdly elevated value for gold around 70% of all gold exists in the form of JEWELRY widely dispersed around the world leaving less than 30% of it even available theoretically to be used in any financial capacity and most of that is OWNED BY PRIVATE PARTIES leaving practically nothing available in the way of gold in relationship to any currencies anywhere in the world.

            Gold has NO FINANCIAL RELEVANCE whatsoever and never will ever again and the total value of the entire 180,000 or so metric tonnes which exist of the stuff are worth less than 1% of the the total assets in the world.

          • jox

            laughably false

    • Joltin Joe

      Plunge Protection Teams stop the market from crashing all the time.

      • socalbeachdude

        Absolutely false. The so-called “PPT” was totally abolished in 1993.

        • Wizard of Aus

          Hey, it’s Chas.

        • Joltin Joe

          Wrong

          • socalbeachdude

            There is no such thing as the “Working Group” or the PPT.

            The so-called PPT was TOTALLY DISBANDED AND DISCARDED during the first Clinton 4 year Presidential term.

            The Plunge Protection Team (PPT) Does Not Exist – John Mauldin

            http://www.safehaven.com/article/721/the-plunge-protection-team

            Remember One Thing – Karl Denninger

            The Fed has never, in its history, managed to actually prevent a market collapse.

            It did not do so in 1929.

            It did not do so in 1987, despite it being evident that the market was going to blow up.

            It did not do so in 2000, despite it being evident that the market was grossly overheated.

            It did not do so in 2008, despite having more than a year worth of warning (the two Bear Stearns hedge funds) and in fact Bernanke testified under oath that “subprime was contained.”

            It will not do so this time either.

            https://market-ticker.org/akcs-www?post=230456

          • Joltin Joe

            Listen I don’t care about all that, maybe I’m calling it the wrong name, The fact is there is a protection against the market falling too far too fast. They take stocks ‘offline’ if the price moves too much.

          • socalbeachdude

            Absolutely false. There is no “protection” at all against market crashes other than CIRCUIT BREAKER RULES which kick in to suspend markets if and when they fall below certain thresholds on any given trading day.

          • Joltin Joe

            same as a PPT, preventing a fall

    • MikeAZwildcats

      As long as Halo 3 on XBOX is still operational during the currency crisis I am all good.

  • df NJ

    Interest rates will rise very slowly. Too many foreign interest control the Federal Reserve. If they raise rates too fast foreign governments will fall.

    I think the biggest problem we have is 3% inflation is so anemic it’s practically deflationary when you take into account population growth and worn out replacement purchases. It’s probably negative real growth. The the mother effers just want to keep us all miserable, hopeless, with nothing more than poverty wages.

    I sure hope Trump can do better than Obama but I doubt it.

    • socalbeachdude

      Absolutely false. No “foreign interests” have any control whatsoever of the Federal Reserve which is owned and control by US MEMBER BANKS. The Federal Reserve ONLY SETS 3 RATES – none of which matter the slightest bit of a hoot in the US economy, let alone the global economy where they are utterly irrelevant.

      All interest rates that matter to the US economy are SET BY THE US TREASURIES MARKETS which are a $13 trillion a year market. The reason that yields (interest rates) are so low there is because DEMAND FOR US TREASURIES IS AT RECORD HIGH LEVELS and the greater the demand the lower the yields (interest rates) as prices of bonds are inverse to their yields.

      The Federal Reserve ONLY SETS 3 INTEREST RATES and none of those 3 have anything at all to do with employment, inflation, or other interest rates that matter in the US economy as all interest rates that do matter in the US economy are keyed off the yields (interest rates) set in the nearly $13 trillion a year US Treasuries markets.

      The only 3 rates that the Federal Reserve is involved with setting are:

      1) Federal Discount Rate – currently 1.00%

      2) Federal Funds Rate (which it influences) – currently in the range of 0.25% to 0.50%

      3) Federal Reserve IOER (Interest On Excess Reserves) – currently 0.50%

      The IOER (Interest On Excess Reserves) interest rate does have an immediate beneficial impact for banks as it is the interest paid to banks on their excess reserves accounts inside the Federal Reserve and those accounts now have more than $2.5+ trillion sitting in them, and banks were very fortunate to see the interest they received on those DOUBLE on December 16, 2016 from 0.25% to 0.50% and are urging the Federal Reserve to get that increased again by at least 0.25% to 0.75% without any further dawdling or delay as banks need increased income to help profitability this year.

      • Christoph Weise

        The US treasury market is a closed loop. In a closed loop the rates are not set by the market.

        • socalbeachdude

          Laughably false. The US Treasuries bond markets are the LARGEST SINGLE MARKET IN THE ENTIRE WORLD and are a $13 trillion a year market with the most diverse and largest group of investors in any single market. The reason that the yields (interest rates) were driven so low was the ENORMOUS DEMAND FOR US TREASURIES. Prices of US Treasuries (bills, bonds, notes, and TIPS) are set at auctions and as in all auction the highest bids win. There are typically around 3 bids for every US Treasury available. Prices of US Treasuries are INVERSE TO YIELDS and the higher the bids the lower the yields.

          • Christoph Weise

            The investors are financial institutions which have been propped up with money from the FED. The FED is not reigning the markets with interests rates but with lending to the banks. This process substitutes money from savers and distorts the prices on the markets.

          • socalbeachdude

            Laughably false. The Federal Reserve does not “prop up” any banks by allowing any borrowing from the Federal Reserve and ONLY EVER PROVIDES FUNDS DIRECTLY TO ANY MEMBER BANKS through lending through the Federal Discount Rate which carries a 100% premium to the Federal Funds Rate at which banks can borrow from each other and that lending is ONLY DONE:

            1) For LIQUIDITY PURPOSES

            2) On a fully COLLATERALIZED BASIS

            3) For VERY SHORT TERMS (typically overnight)

            Banks are AWASH IN VAST EXCESS LIQUIDITY FROM DEPOSITORS and their ratio on loans outstanding to customer deposits is at a RECORD LOW 67% and BANKS HAVE NO NEED WHATSOEVER TO BORROW FOR LIQUIDITY PURPOSES at all today.

            Banks MAY NEVER USE FUNDS BORROWED FROM THE FEDERAL RESERVE FOR ANY PURPOSE OTHER THE THAN LIQUIDITY PURPOSES TO CLEAR OVERNIGHT TRANSACTION IMBALANCES and that comes at a huge premium compared to borrowing at the Federal Funds Rate of 0.50% from other banks for the very same purposes.

            Member banks of the Federal Reserve now have more than $2.5 TRILLION of excess funds in their EXCESS RESERVES ACCOUNTS INSIDE THE FEDERAL RESERVE AS A RESULT OF THE FEDERAL RESERVE’S QE programs and are WALLOWING IN VAST EXCESS LIQUIDITY as is confirmed by the latest H.6 reports from the Federal Reserve at:

            Money Stock Measures – H.6

            http://www.federalreserve.gov/releases/h6/

            THE PURPOSES OF THE FEDERAL RESERVE’S QE

            There were 3 reasons for the Federal Reserve version of QE.

            First, it was essentially a charade to make it look like the Federal Reserve was doing all it could to “stimulate” the economy and provide a “wealth effect” to try to life economic activity and asset prices.

            Second, and much more important in reality, the primary purpose of QE was TO CREATE A LARGE LIQUIDITY POOL OF EXCESS RESERVES OWNED BY THE BANKS AT THE FEDERAL RESERVE so that the banks would not have to sell off assets such as securities at fire sale prices in the next financial crises, panics, and shocks but rather could turn to that liquidity pool at the Federal Reserve to clear transactions, particularly from bad derivatives plays.

            Third, QE lowered the government interest on its massive then $19.2 trillion debt because the Federal Reserve increased its holdings of US Treasuries to over $2 trillion making the interest on those ESSENTIALLY FREE to the US government because the Federal Reserve operates as a NOT-FOR-PROFIT entity and rebates 100% of its annual profits each year to the US Treasury after paying a modest 6% annual dividend to its member bank shareholders.

            That mission has now been fully accomplished with a LIQUIDITY POOL OF $2.5+ TRILLION in the excess reserves of the banks at the Federal Reserve which will act as a cushion in the next series of crises. Which, I might add, are now HERE and rapidly worsening.

          • Christoph Weise

            THX for your explanations

          • socalbeachdude

            You are quite welcome.

          • JD Williams

            I tried to cash my tax refund at a bank. It looked like a total freak-out. They implored me to take a cashier’s check. I refused. It took almost an hour for those ppl to locate 4K. So….there’s that.

          • socalbeachdude

            Your bank must not be very competent or you’re not a customer at the bank you tried to cash that check. Do you have a checking or other account there? If so, why didn’t you just deposit the check in your checking account? If you didn’t have any accounts there it is a real wonder why they would even consider cashing a check for you. Why don’t you set up a banking relationships with a major competent bank such as JPMC or Wells Fargo and then you’ll have no issue at all either depositing or cashing checks at your branch?

          • Stuey

            Where is this “enormous demand” for US Treasuries coming from? You have stated here previously that foreign countries have not increased their holdings in the last 10 years and the Federal Reserve holds a small amount of US Treasuries, so who is buying all these treasuries?

          • socalbeachdude

            Of the total of $19.5 trillion, the largest holder of US Treasuries is the US government itself through its various agencies with the largest being the Social Security and Medicare Trust funds with around $6 trillion invested in US Treasuries.

            The next largest single holder of US Treasuries is the Federal Reserve with around $2.5 trillion in US Treasuries.

            Around $5 trillion is owned by foreign governments, corporations, and other entities outside the US.

            The rest is owned by a vast array of holders including banks, hedge funds, money market funds, pension funds, mutual funds, ETFs, insurance companies, and individuals.

            For further information on the distribution of US Treasuries see:

            http://www.TreasuryDirect.gov

  • JC Teecher

    “Now is not a time to party. Rather, it is time to batten down the hatches and to prepare for very rough seas ahead.”

    Right you are Mr.Snyder. You have been sending out the warnings, and the information to back it all up. The folks that see their world in a never ending Merry go Round ride of prosperity, are usually the ones that get hit the hardest. I made and effort to warn folks last week, that the interest rates are going to rise, and most likely would start the spiral, of which is not economically upward for the average household.

    National debt is of no concern for the potus and all his underlings, as they know the fix is in for the NWO, and a crash/bankrupt ussag, is part of the plan, for a reset to NWO standards and currency. Run it up to the moon, and then crash it out, watch it rise from the ashes of ruin, with a new face on the Eagle. But, it has eyes of a serpent, and a voice of a dragon.

    The poor only see things as barely getting worse, since they are so near the bottom rungs as it is.

    As most people on this site, seem to be in pretty good shape financially, or definitely not on the welfare side, should be making their lists and checking them twice..and we ain’t talkin about Christmas stuff either.

    If anyone has more $$ than they know what to do with, me and the little woman would sure love one of those high quality freeze dryers, like a Harvest Right brand in stainless steel.

    We just can’t justify going in debt again, and are not willing to part with anything to raise the $$ for one.
    We would even handle all the freight; just sayin’.

    • SnodtBlossom

      It’s obvious JC T wasn’t invited to his company’s XMas party.

  • Arrow

    “Global bond investors have seen trillions of dollars of wealth wiped out.” Nonsense. The so-called trillions of dollars of wealth was fantasy. Everyone knows yet the MSM (and even some of the good guys) “report” on the beatings that are being dealt-out in the market these days. It’s a lie. Any alleged wealth was derived through extortion and theft. The PTB have manipulated the markets for so long that it’s become a joke. As for Trump and his soon to be administration, I wish him the best, but if one were to believe that he and his ilk will be a saviour, then he/she is going to be disappointed. This is THE

    • socalbeachdude

      It is absolutely TRUE that bond prices have lost more than $1.2 trillion in value this month and those losses will continue as bond prices fall and yields rise. Bond prices are INVERSE TO YIELDS (interest rates). No “wealth” was “derived through any extortion and theft” and that assertion is beyond utter preposterous. Investors and speculators had driven yields (interest rates) to laughably low levels and they are move up quickly towards – but certainly not to – normalized rates and they will move much higher in all likelihood in 2017.

  • socalbeachdude

    Nobody is setting anything up at all for such a scenario. Interest rates have been FAR BELOW NORMAL FOR FAR TOO LONG and the bond markets are simply pricing in RISK OF LOSS and POTENTIALLY HIGHER INFLATION as well as moving towards the normal base level of 3% REAL RATE OF INTEREST. The price of bonds is inverse to yields (interest rates) so as yields rise the price of bonds fall and that has resulted in more than $1.2 trillion in losses in the US and global bond markets this month.

    Yes, the stock markets are PREPOSTEROUSLY OVERVALUED as are commodities and real estate and both will be adjusting accordingly.

  • socalbeachdude

    Bond Carnage hits Mortgage Rates. But This Time, it’s Real

    The carnage in bonds has consequences. The average interest rate of the a conforming 30-year fixed mortgage as of Friday was quoted at 4.125% for top credit scores. That’s up about 0.5 percentage point from just before the election, according to Mortgage News Daily. It put the month “on a short list of 4 worst months in more than a decade.”

    One of the other three months on that short list occurred at the end of 2010 and two “back to back amid the 2013 Taper Tantrum,” when the Fed let it slip that it might taper QE Infinity out of existence.

    Investors were not amused. From the day after the election through November 16, they yanked $8.2 billion out of bond funds, the largest weekly outflow since Taper-Tantrum June.

    The 10-year Treasury yield jumped to 2.36% in late trading on Friday, the highest since December 2015, up 66 basis point since the election, and up one full percentage point since July!

    The 10-year yield is at a critical juncture. In terms of reality, the first thing that might happen is a rate increase by the Fed in December, after a year of flip-flopping. A slew of post-election pronouncements by Fed heads – including Yellen’s “relatively soon” – have pushed the odds of a rate hike to 98%.

    http://wolfstreet.com/2016/11/19/bond-carnage-hits-mortgage-rates-but-this-time-its-real/

  • Undecider

    Look at the positive side, when interest rates go up, banks make more money. We then finally see decent interest in our checking and savings accounts.

    • socalbeachdude

      You are not likely to see any increases paid in interest rates on time deposits such as savings accounts until and unless demand for borrowing picks up as the banks simply do not want and cannot use as of the funds they have from deposits. The loans outstanding ratio to deposits funds is currently at a record low 67%.

      • Stuey

        If there is no demand for borrowing then why are Americans debt levels at record highs?

        • socalbeachdude

          Nobody said there was “no demand for borrowing” but rather LOW DEMAND FOR BORROWING from banks in the US economy and the ratio of outstanding loans to customer deposits is at a record low 67%. Consumer debt has not increased much at all over the past 10 years whereas deposits have increased at banks by around 50% during the same time and are now at record high levels with more than $13 trillion in M2 consisting of cash, check, and savings.

          • Stuey

            There has been numerous articles on this website discussing the increase in individual debt in this country with the actual numbers. So something isn’t jiving here.

          • socalbeachdude

            The world is “JIBING” (matching) not “jiving” (as in shucking and jiving, i.e. lying). There hasn’t been any significant increase in individual debt in the US and very little increase at all in consumer debt over the past 8 years. There has been a huge increase in corporate debt and government debt which shareholders and the public are responsible for, however.

    • LIZ THE SHIZ

      2-3% woo hoo!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

  • robert

    The Republicans and Democrats have kept us engaged in these ridiculous wars that have enriched contractors and thugs in Afghanistan and Iraq to mention two. As long as we continue to fight endless wars that gain nothing, we have NO chance to get well with our economy. None. Sick of it.

    • socalbeachdude

      Those “wars” are not a significant portion of the federal budget and all military spending exclusive of Veterans Benefits is only 16% of the federal budget.

      • nick

        Actually, military spending is approximately 54% of discretionary spending, and does not include Veterans, nukes(under dept. of energy), Homeland (in)security, the approximately 18 agencies that do the spying and track all of us in conjunction with the Dept. Of War(the original name but more appropriate now), and if you add in interest on the borrowed money for these programs, it easily exceeds 1 trillion dollars.
        All empires throughout history implode from over reach, and there will be no exception from the biggest debtor in history. Tick tock goes the clock!

        • nick

          whoops, forgot an expense. The military “gifts” to favored nation states, such as the $38 billion gift congress just gave to our Israel buddies.

          • socalbeachdude

            That is a very tiny little bit of money in the big picture of $4 trillion in annual federal expenditures. It should be greatly reduced or eliminated but would make no difference at all to reducing federal debt.

        • socalbeachdude

          Absolutely false as to your assertions.

          Federal government spending is VERY HUGE PROBLEM and the biggest issue with US government spending is that around 63% is being spent each year on SOCIAL WELFARE AND MEDICAL EXPENSES and that amount will continue to rise dramatically.

          There is very little in the way of federal spending that is “corruption” or “waste” and that is a totally bogus argument. Military spending including Veterans benefits amounts to only about 20% of total annual federal government spending.

          Only 20% of the US government annual spending is for total military spending with 16% for actual military spending and 4% for Veterans Benefits.

          The biggest part of the spending is SOCIAL PROGRAMS including the Social Security and Medicare insurance programs which are NOT ACTUARILY SOUND and which are paying out vastly more than they have taken in with payroll taxes.

          A summary of the fiscal 2015 US federal government expenditures totaling nearly $4 trillion is as follows:

          WELFARE & MEDICAL (63%)
          33% Social Security, Unemployment, Labor
          27% Medicare & Health
          ..3% Housing & Community

          MILITARY (20%)
          16% Military
          ..4% Veterans Benefits

          INTEREST ON DEBT (6%)
          ..6% Interest on Debt

          FOOD & TRANSPORTATION (6%)
          ..3% Food & Agriculture
          ..3% Transportation

          EDUCATION & SCIENCE (3%)
          ..2% Education
          ..1% Science

          ENERGY, ENVIRONMENT, & INTERNATIONAL (2%)
          ..1% International Affair
          ..1% Energy & Environment

          OTHER EXPENSES (1%)
          ..1% Government Expenses (general)

          The complete breakdown of Fiscal 2015 expenditures is extensively detailed including actual numbers as well as pie-charts with various percentage breakdowns as to discretionary and non-discretionary expenditures at:

          https://www.nationalpriorities.org/budget-basics/federal-budget-101/spending/

          • Gay Veteran

            Pentagon at 16%?
            should be 4%

            bring the troops home
            seal the borders (NO illegal immigration)
            rebuild America

            NO foreign entanglements

          • socalbeachdude

            I don’t disagree with your assessment, but one of the ONLY THINGS the federal government is required to do is to provide for the defense of the USA as a whole. As to spending for military it looks like Donald Trump wants to INCREASE MILITARY SPENDING rather than reduce it and getting it cut in any meaningful way will be a very difficult challenge.

      • Taos61

        Oh,but military IS a significant portion of the fed budget.Is 51% significant enough for you??

        • socalbeachdude

          Absolutely false. Total military spending of all types is 16% of the $4 trillion a year federal budget. Plus there is another 4% for Veterans benefits for combined military spending of 20% of the federal budget.

      • robert

        Even if your numbers were correct, which they are not, 16% is not a small number. The pentagon cannot even account for the money spent on these absurd “small” wars. Never mind the thousands of dead and maimed soldiers. Keep doing the same thing, get the same results. I do hope Mr. Trump will invite Ron Paul in for a conference and get some understanding on our ridiculous foreign policy. Nuts!

      • Gay Veteran

        How many $TRILLIONS were squandered in Iraq and Afghanistan?
        gee, think if that money had been spent on our rotting infrastructure

        • socalbeachdude

          That is water (money) under the bridge and nothing can be done about those absurd WARS OF TERROR now.

  • john

    eheh michael is back in business apparently.preaching the collapse is his source of income.

    • socalbeachdude

      And he is quite correct on these issues.

  • paul mullin

    Yawn. Y’all were saying the sky was gonna fall last year. Panic!! Run for your lives!! Um… nevermind. False alarm! Oh bother..

    • socalbeachdude

      The bond markets have crashed hard with losses of more than $1.2 trillion just this month and that is due to interest rates soaring in the bond markets in the US and globally, and that will likely knock down equities (stocks) as well as commodities over the coming months.

      • Thomas D Guastavino

        Temporary, it is a reflection of faith that we are going to have a real economy.

        • socalbeachdude

          Nope. Unless you consider a 20 year horizon of increasing interest rates to be “temporary.”

  • socalbeachdude

    Bond Carnage hits Mortgage Rates. But This Time, it’s Real

    The carnage in bonds has consequences. The average interest rate of the a conforming 30-year fixed mortgage as of Friday was quoted at 4.125% for top credit scores. That’s up about 0.5 percentage point from just before the election, according to Mortgage News Daily. It put the month “on a short list of 4 worst months in more than a decade.”

    One of the other three months on that short list occurred at the end of 2010 and two “back to back amid the 2013 Taper Tantrum,” when the Fed let it slip that it might taper QE Infinity out of existence.

    Investors were not amused. From the day after the election through November 16, they yanked $8.2 billion out of bond funds, the largest weekly outflow since Taper-Tantrum June.

    The 10-year Treasury yield jumped to 2.36% in late trading on Friday, the highest since December 2015, up 66 basis point since the election, and up one full percentage point since July!

    The 10-year yield is at a critical juncture. In terms of reality, the first thing that might happen is a rate increase by the Fed in December, after a year of flip-flopping. A slew of post-election pronouncements by Fed heads – including Yellen’s “relatively soon” – have pushed the odds of a rate hike to 98%.

    http://wolfstreet.com/2016/11/19/bond-carnage-hits-mortgage-rates-but-this-time-its-real/

    • Thomas D Guastavino

      Temporary

  • Dan Jones

    And everyone said Trump was the Savior of America…

    Always be a light that is shininginthedark

    • Thomas D Guastavino

      Patience…patience

  • Thomas D Guastavino

    Democratic hold on the government has been like a tumor that has been allowed to grow and the only treatment being narcotics. Feels great but the tumor will eventually kill you. Trump is the surgeon who will remove the tumor. Very painful in the beginning but the only real chance to save the patient.

    • socalbeachdude

      Highly doubtful. Trump may very well make the federal debt and deficit problem VASTLY WORSE particularly if he tries to play the “fiscal stimulus” game with more government spending.

    • AcheArtist

      Love your analogy…

  • Saeed Hoque

    Fed does not set interest rates…the market sets the rate and the Fed is forced to follow to give the illusion that they are in charge…and then they go overboard with raising rates and causes the crash when they want to…for a good crisis that should not go to waste…and proper the next solution after the reaction from the public…Hegelian dialectic…and blame everything on the sitting president when the cause of crisis was set in motion years ago.

    • df NJ

      Although the Hegelian is always in play, this time I think people are overreacting. A 1/4 point rise per year will take 20 years before it becomes meaningful. The stimulus and tax breaks will have a bigger affect on the economy than a 1/4 point rise which is practically nothing. Plus OPEC is cutting production we will see $55 oil by spring which is good for stocks bad for everyone else.

      • socalbeachdude

        We have a GLOBAL OIL GLUT and the world is overflowing with oil and its price is headed to around $20 per barrel.

    • socalbeachdude

      Correct. The only 3 interest rates set by the Federal Reserve don’t matter the slightest bit of a hoot as all interest rates that do matter to the US economy are set in the $13 trillion a year US Treasuries markets.

  • Barry Soweto

    Print, Print, Print till we out of paper and ink !

  • mister_roboto

    “….but the truth is that Obama [and Bush Jr.] will be far more responsible for what happens than Trump will be.”

    Fixed that for ya. 😉

    • df NJ

      I blame God…I mean the Federal Reserve. 3% or less growth is pure misery.

      • socalbeachdude

        That has nothing to do with the Federal Reserve.

  • Jerry

    And when Obama took office, you could have said the same, that he inherited GW’s mess, and will take the blame. And yes, you have consistently heaped the blame on him. So now it is Trump’s turn. Que lastima!

  • Chris P

    For those that believe that there is one bit of free market pricing in stocks, bonds or derivatives is sadly deluded. The Fed and the treasury killed that almost 10 years ago. All markets are controlled by our govt and will be pulled down at their decision.

    • socalbeachdude

      Laughably false. The Federal Reserve has nothing whatsoever to do with market pricing in stock and derivatives and only owns less than 12.8% of US Treasuries. Prices are SET BY THE MARKETS but those markets are filled with false perceptions and hopium and MANIC SPECULATION which is the core problem as players TOTALLY DISREGARD SOUND FUNDAMENTALS.

  • Swath – PROUD DEPLORABLE

    Regan came into office during another time where pain had to be inflicted for recovery to begin. Trump is reading from a similar play book. There has to be pain first as anyone knows who lived through the post Carter reset.

    • socalbeachdude

      The US was in a severe recession starting in 1980 and lasting through August 1982, but the “solution” was not to solve any of the underlying problems but rather to engage in a MASSIVE DEBT FUELED SPENDING SPREE which was the largest in history and directly led to the US government debt increasing at the end of 1988 to 280% of what it was when Reagan took office in 1981. And, it has continued to explode up since then to more than $19.5 trillion and increased more than $1.4 trillion last year alone in Fiscal 2016 ended 09/30/2016.

  • Taos61

    History shows the economy goes into recession just about every time a repub gets into office starting with Teddy Roosevelt.Just the facts jack.

    • JC Teecher

      Economic recession is a relative concept. Being un-relative if one is prepared all the time, for all know catastrophes.

      Recession becomes very relative if one is not prepared, and it comes with a loss of job and/or income, with excessive debt to savings/income.

      In the early 80’s, the recession was virtually “no affect” on me and my immediate family, as we were low debt, and low maintenance at that time…fortunately.

      Not so much..”no affect” for the folks caught in a debt triangle, with collection processes in effect; of which I was engaged as the collector of those times.
      Yep, that was ole JC, working for the “bankster man” of that day.

    • retired22

      And goes into a 10 year long depression when his cousin,the Democrat social engineer FDR gets into office.
      the economy doesn’t go into recession because of the politicians,from either party.
      The economy goes into recession because of the manipulations of the bankers & the financial sector!

      • socalbeachdude

        You apparently aren’t aware of NORMAL BUSINESS CYCLES.

  • df NJ

    “Major changes for Medicaid coming under Trump and the GOP”

    “You cannot let people die on the street, ok?,” Trump said at a CNN town hall in February. “The problem is that everybody thinks that you people, as Republicans, hate the concept of taking care of people that are really, really sick and are gonna die. We gotta take care of people that can’t take care of themselves.”

    When basic human decency becomes a campaign promise that’s a pretty good indicator it’s not going to turn out well.

    It’s funny, the article stated, “Republicans have long criticized Medicaid as being bloated, inefficient and rife with fraud.” But you never hear anyone talking about fighting the corruption. All you hear is the program has to be axed.

    Why is fighting corruption in government never talked about?

    • socalbeachdude

      The issue with medical services in the US is VAST PRICE GOUGING BY HOSPITAL CORPORATIONS AND PHARMACEUTICALS and that must be addressed as the first priority in reforming the US medical delivery system. By doing that costs can be lowered up to 90%.

  • sister soldier

    Trump should probably pull the reins in on Bannon while his administration is still in it’s infancy. The more Bannon talks the more he gives credibility to a rigged system.

    • LIZ THE SHIZ

      I agree, Trump should watch out for Bannon, his bona fides include Harvard, Goldman Sachs, and many Hollywood connections which make me feel the fox is inside the hen house , but a clearer warning should have been noticed when Trump got the nomination and was visited by Henry Kissinger who always tells incoming presidents that they must adhere to the commands of the globalists and the elites or end up like JFK

  • LIZ THE SHIZ

    WARNING WARNING, this might be a FAKE news site and 75% of the commenters are paid trolls using multiple fake names on many different sites IMFAKEO

    • df NJ

      Show me one job posting so I can double dip my wages!

  • df NJ

    Whoop! That’s not part of God’s plan!

    “Pope Francis extends Catholic priests’ right to forgive abortion”

  • Stefan

    Mike, you incredible nincompoop, it is not unfortunate at all that rates are rising.It must happen in order to normalize the yield curve. Consider the retirees who are forced into rigged investments against them, or pension funds that are going bust. Or Mike, how about bringing an end to mal-investment for the sake of bankers? Yes, it will be difficult, but, it is desperately needed for everyone’s benefit, in the longer term.

  • retired22

    The public must realize that the current financial system is like a monetary cancerous tumor,we must go in for surgery to remove the tumor or we die.
    There is going to be pain in this great correction,there is no other way!
    The commenters talk about ‘Helicopter Money’ as though this is some cute joke,an easy & painless way out of our economic problems.It isn’t,…there is no way out of our economic situation without pain.
    What many don’t realize is that when we voted for Trump we voted for a financial & political revolution,that’s what we are going to get & it will hurt for a while.
    Many thought that Trump would just snap his fingers & the present financial system would straighten itself out with a tweek here & a tweek there!
    This won’t happen because our present financial system cannot be repaired,..it must be replaced!
    And finally,some of the more foolish,joke about an endless stream of freshly printed paper currency that will solve the financial problems,this is all wrong.An ever increasing flow of new currency will just cheapen the value of the dollar & a cheaper dollar will destroy the standard of living for middle America.
    What will an easy flow of cheap dollars mean if a hot dog & a soft drink cost $15.00
    We need to absorb the pain now before we can begin to recover later!

    • df NJ

      As long as the people are not rioting everything is fine. The top 1% love this government and economy.

    • socalbeachdude

      Nothing is going to be “replaced” regarding the financial system in the US. The single biggest issue is the federal debt and deficit and if we are to believed reports in the MSM, Donald Trump will be INCREASING both the federal debt and deficit financed by borrowing through the issuance of more US Treasuries.

      • retired22

        No fooling?
        Yellin tell you this personally or you read her mind?
        What if Trump went past the Fed & did what Abraham Lincoln did during the Civil War,….print Greenbacks to cover expenses without giving a dime to the Central Bankers?

        • socalbeachdude

          Donald Trump would NEVER do anything so utterly stupid as your suggest and he has no powers as President to do anything like that at all.

          You simply do not seem to comprehend that the Federal Reserve operates essentially as a NOT-FOR-PROFIT entity and REBATES 94% OF ITS ANNUAL PROFITS TO THE US TREASURY EACH YEAR making the $2.5 trillion or so of US Treasuries that it holds INTEREST FREE TO THE US GOVERNMENT. That was one of the largest reasons for the Federal Reserve doing QE and expanding its balance sheet to purchase US Treasuries.

          • retired22

            The president has no powers over the Treasury dept’s.printing of money? He needs to seek approval from a Central Bank that according to our Constitution is illegal?
            Then if that is so the Banks control America & not the elected government in Washington.Voting for our government is a waste of time as the government is not in control of America’s money,..we should vote for representation at the Federal Reserve Bank instead!
            If Trump can’t order the Treasury to print paper money backed by the government & not the Central Bankers…. how did Kennedy & Lincoln do it?

          • socalbeachdude

            A President has no powers to change an ACT OF CONGRESS unilaterally and the Federal Reserve System was established by an ACT OF CONGRESS CALLED THE FEDERAL RESERVE ACT and Congress has the EXCLUSIVE POWER to amend or abolish that Act.

            I would suggest that you read and attempt to comprehend the Federal Reserve Act at:

            https://www.federalreserve.gov/aboutthefed/fract.htm

            President Kennedy did absolutely nothing in any way to challenge the Federal Reserve Act.

          • retired22

            It violates the basic constitution of this country

          • socalbeachdude

            Absolutely false. The Federal Reserve Act cited above does not in any way violate any provision of the Constitution of the United States of America.

          • goldminer

            Gotta admit you are right. Congress established the FED in 1913. They voted for and willingly gave control of our money to the FED. Congress has oversight of the FED. So it is constitutional. The Constitution gave congress authority to coin money. Article 1 section 8. It never really said how they could do it. Or forbade them from creating the FED.

          • socalbeachdude

            Yep, and it is what it is. Can you just imagine how HUUUUGGE the federal debt would be and how large the money supply would be if that had been left up to our grossly profligate Congress and the US Treasury?

          • Stuey

            If the US Treasury printed US currency (not notes)how would that create debt?

          • socalbeachdude

            Where would that currency go to and how? MONEY IS NEVER “GIVEN” TO ANYONE FOR FREE. No government can just print and spend money for its own purposes without totally crashing the value of that currency. Even in Japan that is not the case with the BOJ (Bank Of Japan) and the closest to doing that is the PRC (People’s Republic of China) which has created an unprecedented $30 trillion of money and debt over the past 10 years and is now seeing the value of its currency and the bubbles it blew come crashing down.

            Also, the flip side of debt is that it is an ASSET held (owned) by its investors. Where would the $19.5 trillion of ASSETS now invested in US Treasuries go but for the existence of US Treasuries?

          • Stuey

            All that makes sense, but you didn’t answer my question, how would it create debt?

          • socalbeachdude

            You are correct. If the US Treasury simply printed money to spend recklessly it wouldn’t create debt would would crash the value of the US dollar. But that wouldn’t change the fact that nearly $20 trillion of US government debt has been run up and all of that debt would still continue to be due, as would the $44 trillion of other debt in the US economy which would not be affected at all by the US government printing money at will.

  • robert

    Anyone seen AWAYS TOMORROW? Thought he might have posted a new countdown.

    • df NJ

      socialbeachdude is much more interesting to have around.

    • SnodtBlossom

      Well it WOULD seem appropriate, don’t you think?
      Countdown #7…

  • df NJ

    You gotta love Wall Street:

    “As everyone became rich off Medallion, lifestyles changed. Trains to Manhattan gave way to helicopter commutes. Scientists swapped Hondas for Porsches. Fancy hobbies became normal. Simons’s cousin, Robert Lourie, who heads futures research, built an equestrian arena for his daughter, with arches so large that a bridge into New York City had to be shut down at night to facilitate their journey. Yachts also became a thing. “

  • greanfinisher .

    I would welcome several interest rate boosts as they will do wonders for my bonds.

    • socalbeachdude

      Prices of bonds are INVERSE TO YIELDS (interest rates) and the prices of your existing bonds will FALL as yields soar on bonds.

      • greanfinisher .

        Not with U.S. Series I Savings Bonds partner.

        • socalbeachdude

          Where do you get that bizarre notion? Bond prices are always inverse to yields (interest rates) on bonds you own and they have a fixed face price for settlement at maturity that never changes, but the value at which you can sell the bond prior to maturity does fall when yields rise.

          http://www.TreasuryDirect.gov

          • greanfinisher .

            The Series I Bonds do have a fixed rate, but they also contain an automatic inflation rate.

          • socalbeachdude

            So what? That has nothing to do with the statement that I made which is true. As to any inflation indexes that is a feature of TIPS and has nothing whatsoever to do with increasing yields (interest rates) on bonds but rather everything to do with how “inflation” itself is calculated.

  • socalbeachdude

    Most bonds today – including 50% of US Treasuries – are VERY SHORT TERM DURATIONS and increases in yields on those would in fact be very deleterious to the US economy with its impact felt nearly immediately. Corporations have around $14 trillion in debt in the US and the US government’s total debt is around $19.5 trillion and both would experience very significantly high interest costs causing slowdowns in borrowing and “investing” very quickly as interest rates rise.

    What caused the October 1987 crash of the markets was the increase of interest rates in Germany to over 10% and had nothing to do with so-called HFT.

  • socalbeachdude

    Contrary to the ignorant assertions of the dolts at ZeroBrains, foreign holdings of US Treasuries are VERY LITTLE CHANGED OVER THE PAST 10 YEARS and the two largest holders of US Treasuries remain Japan and China with holdings nearly unchanged at $1.3 and $1.2 trillion dollars respectively.

    The current federal debt in the US is just over $19.5 trillion with nearly all of that (about 18.2 trillion) having been run up just since 1981. It is all based on US TREASURIES which are the assets that support the US debt and all US Treasuries are bonds (bills, bonds, notes, and TIPS) that have maturities ranging from a few days out through 30 years. All US Treasuries are PAID IN FULL to their holders (owners) upon maturity, and about $6 trillion of them are PAID IN FULL EACH year through the issuance of around $7 trillion of NEW US TREASURIES each and every year with about $1 trillion of that for the NET INCREASE in the federal debt.

    A key problem is that the federal debt is increasing at an alarmingly high level and is up by more than $1 trillion in the first 6 months of the current Fiscal 2016 year.

    Most of the US Treasuries are held by citizens of the US and companies in the US including pension funds, banks, insurance companies, money market funds, bond funds, etc.

    For a complete breakdown of the foreign holdings of US Treasuries, see:

    http://ticdata.treasury.gov/Publish/mfh.txt

  • J B

    BONDS are just the ultimate Legal Ponzi Scheme.
    All you have to do is sell another Bond just prior the old Bond due date to pay out that Bond. The scheme falls apart when nobody buys a new Bond to pay off the old Bond, and so enter the Buyer of last resort, the Feral Reserve.

    • df NJ

      The ultra rich have no place else to put their gobs of money. Gold is too heavy to carry around and after the first few thousand pounds it gets tiring.

  • NARENDRA MODI KING of WORLD

    Don’t worry michael, by that time Donald trump will have handed over the keys to the dollar printing machine to KING of the WORLD NARENDRA MODI

    • df NJ

      King of delusion

  • wtnss4Jesus

    God says, “The people’s wickedness and pride have reached a climax. Their violence will fall back on them as punishment for their wickedness. None of these proud and wicked people will survive. All their wealth will be swept away. Yes, the time has come; the day is here! There is no reason for buyers to rejoice over the bargains they find or for sellers to grieve over their losses, for all of them will fall under My terrible anger. And if any merchants should survive, they will never return to their business. For what God has said applies to everyone – it will not be changed! Not one person whose life is twisted by sin will recover. . . They will throw away their money, tossing it out like worthless trash. It won’t buy their deliverance in that day of the Lord’s anger (when Jesus returns). It will neither satisfy nor feed them, for their love of money made them stumble into sin. They were proud of their gold jewelry and used to make vile and detestable idols. That is why I will make all their wealth disgusting to them. I will give it as plunder to foreigners from the most wicked of nations, and they will defile it. . .I will bring the most ruthless of nations to occupy their homes. . .”

    Now is the time to repent, turn from your sins and turn your heart fully to God by putting faith in His Son, Jesus Christ so you can be saved!

    • df NJ

      Is there ever a time not to repent? Why is now different than any other time?

    • GSOB

      Ezekiel 7
      (Young Believer’s Bible)
      Fulfilled

  • Barry Goldwater

    Again I must differ with the author on one key fundamental point and it is that ZIRP is not symptomatic of a healthy economy so then if and when interest rates are allowed to find their natural ceiling the economy may return to more normal performance levels.
    During the economic boom 94 – 00 interest rates ranged between 3.25 – 6.5 % and as most here can recall things were quite rosy.
    I will also qualify that by saying if rates are raised to soon they can act as a blanket over the economy so Janet Yellen in whom I’ve no confidence should move prudently but by all means she should begin weaning the markets off their free money they’ve had for 8 years.

    • socalbeachdude

      All interest rates that matter to the US economy are SET BY THE US TREASURIES MARKETS which are a $13 trillion a year market. The reason that yields (interest rates) are so low there is because DEMAND FOR US TREASURIES IS AT RECORD HIGH LEVELS and the greater the demand the lower the yields (interest rates) as prices of bonds are inverse to their yields.

      The Federal Reserve ONLY SETS 3 INTEREST RATES and none of those 3 have anything at all to do with employment, inflation, or other interest rates that matter in the US economy as all interest rates that do matter in the US economy are keyed off the yields (interest rates) set in the nearly $13 trillion a year US Treasuries markets.

      The only 3 rates that the Federal Reserve is involved with setting are:

      1) Federal Discount Rate – currently 1.00%

      2) Federal Funds Rate (which it influences) – currently in the range of 0.25% to 0.50%

      3) Federal Reserve IOER (Interest On Excess Reserves) – currently 0.50%

      The IOER (Interest On Excess Reserves) interest rate does have an immediate beneficial impact for banks as it is the interest paid to banks on their excess reserves accounts inside the Federal Reserve and those accounts now have more than $2.5+ trillion sitting in them, and banks were very fortunate to see the interest they received on those DOUBLE on December 16, 2016 from 0.25% to 0.50% and are urging the Federal Reserve to get that increased again by at least 0.25% to 0.75% without any further dawdling or delay as banks need increased income to help profitability this year.

      • Stuey

        Who are buying all the US Treasuries with the demand at record highs?

        • socalbeachdude

          US Treasuries are purchased by a huge variety of investors ranging from the US government itself which holds (owns) about $6 trillion of those and is the largest holder to individuals in the US and around the world. Approximately $5 trillion are held by foreign countries and investors. Banks, hedge funds, pension funds, money market funds, insurance companies, mutual funds, ETFs, which are all part of the immense and largely unregulated shadow banking system collectively hold the largest amount of US Treasuries.

          Breakdowns on ownership of US Treasuries (bond, bills, notes, and TIPS) are at:

          http://www.TreasuryDirect.gov

          • Stuey

            So you are saying the US Govt. holds 6 trillion of it’s own debt? You accounted for 11 trillion of the debt, who owns the other 8.5 trillion?

      • Barry Goldwater

        This is as I would describe it a half truth.
        First one has only to review the transcripts from past Board meetings to see this statement debunked.
        The one truth here is that mortgage rates are in fact a reflection of bond rates.
        The ZIRP policies of the past 8 years instituted here and in Europe as well have been designed precisely to accommodate a sluggish economy serving to push money out of bank deposits and into paper markets and economy at large. Excessively low rates for extended periods produce aberrations in the economy as we’ve seen. Deflation itself has been a major focus both here and across the pond with some European capitols experiencing negative rates for the first time.
        One recalls the aggressive actions of former Chairman Volcker in the late 70’s raising rates to abnormally high levels to, as he put it, ” break the back of inflation “. We recall the 10% unemployment rate of 1982 following the shock wave of these rates. The Discount Rate reached a high of 19.08 % in 1981 but fell to about half that for the remainder of the decade. Volcker however was successful in dragging down inflation and by the mid ’80’s the economy had settled into a robust growth curve .
        It’s ludicrous to suggest interest rates have nothing to do with the economy and we have the words and actions of the Federal Reserve to prove it.
        It’s my hope that rates return to normalcy soon which will be the best indicator yet the economy has finally healed from the ’08 debacle for as long as the Federal Reserve remains accommodative it suggests conditions remain averse .

        • socalbeachdude

          Various prior Chairpersons of the Federal Reserve including Paul Volcker and Bonkers Ben have made some extremely absurd assertions which simply are not true. As I stated, the Federal Reserve ONLY SETS 3 INTEREST RATES AND NONE OF THOSE INTEREST RATES MATTER A HOOT IN THE US ECONOMY.

          All interest rates that do matter in the US economy are SET IN THE US TREASURIES MARKETS. It was not any of the 3 Federal Reserve interest rates that had any impact on the US economy in the past but the YIELDS (INTEREST RATES) in the US Treasuries markets that coincided with any moves in the 3 rates set by the Federal Reserve as the records show.

          The Federal Reserve ALWAYS FOLLOWS THE US TREASURY MARKETS AND NEVER LEADS.

          The US economy is in WORSE SHAPE THAN IT HAS EVER BEEN IN and there is now more than $64 trillion of debt across all sectors of the US economy and an increase in interest rates – as is currently happening in the US Treasury markets – will be VERY DELETERIOUS TO THE US ECONOMY.

  • jacob

    How many liberals are going to hope for the worse for us to prove us wrong

  • socalbeachdude

    Indeed not. Michael is one of the really good guys trying to really look at the key issues.

  • Peter Nowak

    Yellen (at her incoming press conference) and SEC’s Chair Mary Jo White should confess that the Irish Accounting firms (incl. BIG4 PwC, EY, Deloitte does not exist under Irish law/ operate illegally and their purported legal opinions are invalid and of no legal effect. Fore more please follow @peternowak81 Why are they still business as usual? Why is Securities and Exchange Commission does not react?

    • socalbeachdude

      Mary Jo White will be replaced as head of the SEC.

      Likely also that Janet Yellen will be replaced in 2018.

  • socalbeachdude

    The Federal Reserve has nothing to do with interest rates in the US economy and only sets 3 interest rates none of which matter the slightest bit of a hoot as all interest rates that do matter are set in the US Treasuries markets and that has always been the case.

    The Federal Reserve ONLY SETS 3 INTEREST RATES and none of those 3 have anything at all to do with employment, inflation, or other interest rates that matter in the US economy as all interest rates that do matter in the US economy are keyed off the yields (interest rates) set in the nearly $13 trillion a year US Treasuries markets.

    The only 3 rates that the Federal Reserve is involved with setting are:

    1) Federal Discount Rate – currently 1.00%

    2) Federal Funds Rate (which it influences) – currently in the range of 0.25% to 0.50%

    3) Federal Reserve IOER (Interest On Excess Reserves) – currently 0.50%

  • socalbeachdude

    Foreign holdings (ownership) of the US debt is only around $5 trillion of the total outstanding amount of $19.5 trillion and hasn’t changed much at all over the past 10 years. For a breakdown in foreign holdings of US Treasuries, see:

    http://ticdata.treasury.gov/Publish/mfh.txt

    Of the total of $19.5 trillion, the largest holder of US Treasuries is the US government itself through its various agencies with the largest being the Social Security and Medicare Trust funds with around $6 trillion invested in US Treasuries.

    The next largest single holder of US Treasuries is the Federal Reserve with around $2.5 trillion in US Treasuries.

    Around $5 trillion is owned by foreign governments, corporations, and other entities outside the US.

    The rest is owned by a vast array of holders including banks, hedge funds, money market funds, pension funds, mutual funds, ETFs, insurance companies, and individuals.

    For further information on the distribution of US Treasuries see:

    http://www.TreasuryDirect.gov

    • Stuey

      I agree with you on this topic. So I am confused why articles on this website act as if foreign countries quit buying US treasuries everything will collapse.

      • socalbeachdude

        Yep, nothing is going to “collapse” with any slowdown in foreign governments and entities purchasing US Treasuries and there has been little to no change in overall foreign ownership of US government debt which remains at around $5 trillion.

  • socalbeachdude

    Huh?

    • PutGodFirst

      You still upvoting yourself? You did that all the time on cnbc

  • Esteban Quiros

    One thing I want to tell. And I see no one addresses the fact. If this economy is going to fall, and the US will find itself flat broke. No better man for rebuilding, who has risen from ashes himself. I might be ignoring some facts about him, but I am confident thos guy will pull the US out of the dirt.

  • thegeorgespyman

    As an old boy scout, all I can say is BE PREPARED! If nothing happens, that’s great. However, if something does go wrong, you will never regret your anticipation of it. The reason Baden Powell stressed preparation was because he served the British army in the Boer War. He was the commanding officer for the Siege of Mafeking. It is not too well remembered today of course, but privation was the rule. He issued his own script and stamps as well. The relief of Mafeking was a cause for global celebration around the Empire.

    Of course it is more prudent for us to store precious metals for any financial siege. As people get sucked back into the markets, the prices of gold and silver are falling. It is a great buying opportunity to be prepared. Gold and silver are not investments to preppers. They are lifeboats for economic hardship. BE PREPARED!

    https://en.wikipedia.org/wiki/Siege_of_Mafeking

    • socalbeachdude

      Metal junk is plummeting in price and gold is now down 13% just since the election and poised to plunge at least $200 more per ounce as India moves to bank imports of that stuff. Gold is on its way to its mean of $456 per ounce and then lower and silver is on its way towards its mean of $8 per ounce and lower.

  • socalbeachdude

    The FEDERAL RESERVE SIMPLY MATCHES THE FEDERAL FUNDS RATE TO THE YIELD ON THE 3 MONTH US TREASURY RATE and that has been the case for the entire 100 years of operation of the Federal Reserve. The yield (interest rate) on the 3 year US Treasuries has now skyrocketed up to 1.41% as of November 25, 2016 whereas the Federal Funds Rate is currently in the range of 0.25% to 0.50% where it was moved upwards to on December 16, 2015.

    Obviously, the Federal Reserve will continue to TIGHTEN as it has been doing for the past year and will raise the only 3 interest rates that they set – not that it matters a hoot – on December 14, 2016.

    The Federal Reserve these days has nothing left that it can do except to push on limp noodles and there’s not much result with that.

    The Federal Reserve DOES NOT SET ANY INTEREST RATES THAT MATTER IN THE US ECONOMY NOR DOES IT EVEN INFLUENCE INTEREST RATES IN THE US ECONOMY TO ANY SIGNIFICANT EXTENT AT ALL.

    Changes in the Federal Funds Rate ALWAYS MATCH THE YIELD ON 3 YEAR US TREASURIES WHICH ARE THE KEY INTEREST RATE THAT ALWAYS LEADS WHERE THE FEDERAL RESERVE SETS THE FEDERAL FUNDS RATE and as Sandy Greenlyn stated recently over on MarketWatch, “It’s interesting how few people understand that the Fed funds rate chases the market-driven 3M T-Bill exactly and they have never deviated at all.”

    Open market operations are TOMO (Temporary) and POMO (Permanent) and were ESSENTIALLY RENDERED IRRELEVANT AND USELESS WITH THE FEDERAL RESERVE VERSIONS OF QE which were POMO ON STEROIDS.

    The BANKS ARE NOW SO AWASH IN VAST EXCESS RESERVES as a result of selling securities to the Federal Reserve with QE that the banks in the US now have MORE THAN $3.5 TRILLION IN EXCESS RESERVES compared to the historical norm of around $25 billion in excess reserves in their accounts at the Federal Reserve.

    The Federal Discount Rate only applies to member banks BORROWING DIRECTLY FROM THE FEDERAL RESERVE AT THE FEDERAL DISCOUNT RATE which is presently 1.00% which is 200% of the top 0.50% range of the Federal Funds Rate at which banks can borrow from each other.

    Banks can only borrow with the Federal Discount Rate on a fully collateralized basis for very short terms (typically overnight) STRICTLY FOR LIQUIDITY PURPOSES and THEY LITERALLY NEVER BORROW FROM THE FEDERAL RESERVE DIRECTLY as that has always carried a stigma and is now 200% of the cost for them to borrow from each other at the Federal Funds Rate. The Federal Reserve Discount Window has always been a LAST RESORT BORROWING MECHANISM for banks with sudden severe liquidity problem and has rarely ever been utilized hardly at all.

    RESERVE REQUIREMENTS are also TOTALLY IRRELEVANT THESE DAYS as banks are AWASH WITH VAST HUMONGOUS EXCESS RESERVES FAR IN EXCESS OF WHAT THEY ARE REQUIRED TO MAINTAIN AS RESERVES AGAINST DEPOSITS.

  • socalbeachdude

    The yield on the 3 month US Treasury is 1.41% as of November 25, 2016, and not 5% as incorrectly stated above. That puts it up more than 40% since early July 2016 on the yield (interest rate) which is a very substantial increase. The Federal Reserve always matches the Federal Funds Rate applicable to interbank lending to the yield on 3 month US Treasuries and the current Federal Funds rate which was last changed on December 16, 2016 is still in the range of 0.25% to 0.50% which is about one-third of the yield (interest rate) on 3 month US Treasuries.

    Daily US Treasury Yield Curve Rates

    https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield

  • James King

    The stockmarket is rallying. The anxiety merchants are wrong again.

  • Lazarovic

    “Of course any problems that occur after January 20th, 2017 will be blamed on Trump, but the truth is that Obama will be far more responsible for what happens than Trump will be.”
    Sorry cupcake, you can’t have it both ways. Republicans own it now. Your failure will be your own, and you will fail. Grow up and accept responsibility, you have the whole gov’t, when you fail, it will be your fault and the fault of your misguided voters. Stupid is as stupid does.

  • Andrew Stunich

    I have always thought that the global elites may secretly want a conservative President to blame the pending economic woes on. At a minimum, a painful “correction” is coming and the left will blame it on conservatives. Moreover, given the mess he has inherited, I do not see how trump could have a successful presidency.

  • eagle keeper

    No matter what we do as money hoarders, stock gurus, savings addicts, and gold hoarders, we are all sadly in the same boat. Just how does Obama think his assets aren’t going to be affected by the coming economic storm everyone has been predicting ever since Beck was on FOX?? It’s kind of like the weekend when family gets together and the kids are playing hide and seek. Well the 18 month old grandson thinks that by just closing his eyes, no one can see him and he is hidden. Same analogy when it comes to the economy. Like it or not we are ALL in the same boat.

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