The Beginning Of The End
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What Is Going To Happen If Interest Rates Continue To Rise Rapidly?

Question MarkIf you want to track how close we are to the next financial collapse, there is one number that you need to be watching above all others.  The number that I am talking about is the yield on 10 year U.S. Treasuries, because it affects thousands of other interest rates in our financial system.  When the yield on 10 year U.S. Treasuries goes up, that is bad for the U.S. economy because it pushes long-term interest rates up.  When interest rates rise, it constricts the flow of credit, and a healthy flow of credit is absolutely essential to the debt-based system that we live in.  Just imagine someone squeezing a tube that has water flowing through it.  The higher interest rates go, the more economic activity will be squeezed.  If interest rates continue to rise rapidly, it will be more expensive for the U.S. government to borrow money, it will be more expensive for state and local governments to borrow money, the housing market may crash again, consumer debt will become more expensive, junk bond investors will be in for a world of hurt, the stock market will experience a tremendous amount of pain and there is a good chance that we could see the 441 trillion dollar interest rate derivatives bubble implode.  And that is just for starters.

So yes, we all need to be carefully watching the yield on 10 year U.S. Treasuries.  On Friday, it opened at 2.76% and hit a high of 2.86% before closing at 2.83%.  The yield on 10 year U.S. Treasuries is up nearly 120 basis points since the beginning of May, and almost everyone on Wall Street seems convinced that it is going to go much higher.

We are truly moving into unprecedented territory, because we have been in a bull market for U.S. Treasuries for the last 30 years.  Many investors don't even know that it is possible to lose money on U.S. Treasuries.  They have been described as "risk-free" investments, but that is far from the truth.

In fact, we could see bond investors of all types end up losing trillions of dollars before it is all said and done.

And those in the stock market will lose lots of money too.  Low interest rates are good for economic activity which is good for the stock market.  The chart posted below shows that stock prices have generally risen as the yield on 10 year U.S. Treasuries has steadily declined over the past 30 years...

CFPGH-DJIA-20

When interest rates rise, that is bad for economic activity and bad for stocks.  That is why so many stock analysts are alarmed that interest rates are going up so rapidly right now.

And as I wrote about the other day, we have just witnessed the largest cluster of Hindenburg Omens that we have seen since before the last financial crisis.  The stock market already seems ripe for a huge "adjustment", and rising interest rates could give it a huge extra push in a negative direction.

By the time it is all said and done, stock market investors could end up losing trillions of dollars in the next stock market crash.

In addition, rising interest rates could easily precipitate another housing crash.  As the Wall Street Journal discussed on Friday, as the yield on 10 year U.S. Treasuries goes up it will also cause mortgage rates to rise...

Higher yields will push up long-term borrowing cost for U.S. consumers and businesses. Mortgage rates will rise, and investors are keeping a close eye on whether this may derail the recovery of the housing market, which has shown signs of turning a corner this year.

In one of my previous articles, I included an example that shows just how powerful rising mortgage rates can be...

A year ago, the 30 year rate was sitting at 3.66 percent.  The monthly payment on a 30 year, $300,000 mortgage at that rate would be $1374.07.

If the 30 year rate rises to 8 percent, the monthly payment on a 30 year, $300,000 mortgage at that rate would be $2201.29.

Does 8 percent sound crazy to you?

It shouldn't.  8 percent was considered to be normal back in the year 2000.

If you own a $300,000 house today, do you think it will be easier to sell it or harder to sell it if mortgage rates skyrocket?

Yes, of course it will be much harder.  In fact, there is a good chance that you will have to reduce your selling price significantly so that prospective buyers can afford the payments.

Let us hope that the yield on 10 year U.S. Treasuries levels off for a while.  If it says at this current level, the damage will probably not be too bad.

But if it crosses the 3 percent mark and keeps soaring, things could get messy pretty quickly.  In fact, according to a Bank of America Merrill Lynch investor survey, the 3.5 percent mark is when the collapse of the bond market is likely to become "disorderly"...

Our latest Credit Investor Survey, conducted July 8-11, showed that 3.5% on the 10-year is most commonly thought of as the trigger of a disorderly rotation – i.e. higher interest rates leading to outflows and wider credit spreads – among high grade investors.

Put differently, 3.0% on the 10-year will not lead to overall wider credit spreads if there is enough buying interest from institutional investors (though note that the 10s/30s spread curve would flatten further, as mutual fund/ETF holdings are concentrated in the belly of the curve, whereas institutional demand is disproportional in the long end of the curve). However, if the probability of a further move higher in interest rates to 3.5% is high – which will be the perception if interest rate volatility is high – certain institutional investors will choose to remain on the sidelines.

Thus there may not be enough institutional buying interest to mitigate retail fund outflows and contain overall high grade spread levels.

So what is causing this?

Well, there are a number of factors of course, but one very disturbing sign is that foreigners are selling off U.S. Treasuries at a pace that we have not seen since 2007...

One of the biggest fears in the financial markets is that foreign investors will stop buying U.S. Treasury securities, causing borrowing rates to surge.

Not that this is the beginning of a frightening trend, but new data from the Treasury Department shows that foreigners were net sellers in June. In fact, this is the largest net sale of U.S. securities since August 2007.

Do you remember all of the warnings that we have received over the years about what would take place when foreign countries started dumping U.S. debt?

Well, it looks like it may be starting to happen.

Unfortunately, there is no way that the party that the U.S. government has been throwing can continue without foreigners buying our debt.  We have added more than 11 trillion dollars to the national debt since the year 2000, and according to Boston University economist Laurence Kotlikoff we are facing unfunded liabilities in future years that are in excess of 200 trillion dollars.

Even with foreigners continuing to loan us gigantic mountains of super cheap money, it would still take a doubling of our taxes to put us on a fiscally sustainable course...

Writing in the September issue of Finance and Development, a journal of the International Monetary Fund, Prof. Kotlikoff says the IMF itself has quietly confirmed that the U.S. is in terrible fiscal trouble - far worse than the Washington-based lender of last resort has previously acknowledged. "The U.S. fiscal gap is huge," the IMF asserted in a June report. "Closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 per cent of U.S. GDP."

This sum is equal to all current U.S. federal taxes combined. The consequences of the IMF's fiscal fix, a doubling of federal taxes in perpetuity, would be appalling - and possibly worse than appalling.

Prof. Kotlikoff says: "The IMF is saying that, to close this fiscal gap [by taxation] would require an immediate and permanent doubling of our personal income taxes, our corporate taxes and all other federal taxes.

"America's fiscal gap is enormous - so massive that closing it appears impossible without immediate and radical reforms to its health care, tax and Social Security systems - as well as military and other discretionary spending cuts."

Can you afford to pay twice as much in taxes to the federal government?

Very few Americans could.

But that is how serious the financial problems of the federal government are.

And all of the above assumes that interest payments on U.S. government debt will remain at current levels.  If the average rate of interest on U.S. government debt rises to just 6 percent, the U.S. government will be paying out a trillion dollars a year just in interest on the national debt.

Also, all of the above assumes that we will have a healthy financial system that does not need to be bailed out again.

But if rapidly rising interest rates cause the 441 trillion dollar interest rate derivatives bubble to implode, the bailout that the "too big to fail" banks will need will likely be far, far larger than last time.

In fact, once that bubble bursts there probably will not be enough money in the entire world to fix it.

If the picture that I have painted above sounds bleak, that is because it is bleak.

Sometimes I get frustrated with myself because I don't feel I am communicating the tremendous danger that we are facing accurately enough.

We are heading for the worst financial crisis in modern human history, and the debt-fueled prosperity that we are enjoying today is going to go away and it is never going to come back.

You can dismiss that as "doom and gloom" and stick your head in the sand if you want, but that isn't going to help anything.  Instead of ignoring reality you should be working hard to prepare your family for what is coming and warning others that they should be getting prepared too.

When a hurricane is approaching landfall, you don't take your family out for a picnic at the beach.  That would be foolish.  Unfortunately, way too many Americans are acting as if nothing like the financial crisis of 2008 could ever possibly happen again.

If you deceive yourself into thinking that all of this is going to have a happy ending somehow, you are going to get blindsided by the coming storm.

But if you make preparations now, you might just be okay.

There is hope in understanding what is happening and there is hope in getting prepared.

So watch the yield on 10 year U.S. Treasuries.  The higher it goes, the later in the game we are.

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  • ryan

    people will only wake up when the inflation arrives. Its difficult to imagine how bad it will be on the other side of this, I just know the time has come for us to face it.

    • Mondobeyondo

      Nope

      .People will wake up when there’s no NFL football on TV, and the liqour aisles have been cleared off Budweiser and Jack Daniels.

      That’s when Americans will get truly mad.
      When that happens – look out.
      Talk about a Jihad… whoa Nelly!

  • davidmpark

    This article seems familiar. Is this a reprint, Mike? Seems like it.

    Probably need to hear it twice – I sure did.

    • Rodster

      Michael did do a writeup on 10 year treasuries but I guess since this is what most investors use as a gauge for where the economy is heading it’s important to reemphasize it.

    • MichaelfromTheEconomicCollapse

      Definitely not a reprint. But it does cover a lot of stuff I have covered before.

      The key to learning just about anything is repetition. And although talking about interest rates may sound boring to a lot of people, it is absolutely key as far as what is coming at us in the near future.

      Michael

      • Kim

        Inculcation: the art of teaching by repetition.

        Works for me!!!

        • SMASH THE CONTROL MACHINE

          to instil by forceful or insistent repetition [C16: from Latin inculcāre to tread upon, ram down, from in- ² +calcāre to trample, from calx heel]

      • smallergovnow

        thanks for what you do Michael. At work I always feel like i am the one telling the big bosses the truth. some appreciate my candor. some think in is complaining. all i want to do is improve the situation for me, my employee’s, my nation. you forget the negative voices and do what your heart tells you to do. if that part of your message is true, then you have nothing to worry about. keep up the good work… Chip

        • MichaelfromTheEconomicCollapse

          Thank you for the kind words Chip. :)

          Michael

      • davidmpark

        Hey, it’s cool. I understand the repetition method. And it’s worth mentioning as this is the best indicator. :)

  • Rodster

    I posted this in another article but Jim Rodgers said in an interview on RT that our national debt is not 17 trillion as we are led to believe. He said it’s probably in the range between 70-100 trillion and that does not account for unfunded liabilities.

    He says the reason we are told the US debt is only 17 trillion is because both the Fed and US Govt have seriously cooked the books.

    • Mudpie

      I have said that for years. We are in such trouble that hell itself may seem a good alternative soon. But perhaps God will steer the good people out. I wonder. He may hold us accountable for aiding and abetting the thieves by doing nothing, lol!

      • Louise in MO

        There’s alot more that God is going to hold us accountable for!

    • Rodster

      Oh isn’t it hilarious how the National Debt has remained exactly the same for the past 87 days.

      “Things that make you go hmm.”

      - Arsenio Hall

    • Hobbes

      You confuse future liabilities here. The higher figures include future payments. It the future, you will have revenue too, to balance this, ….. hopefully.
      Your high dept ensures low interest rates, for the foreseeable future. The interest rates has risen a fraction of a percent, yes, (from Zero) but that is only to off-set the inflation.
      If I were you (ordinary people), i would be much more worried about inflation. Even as a country (including all the rich), US has not improved realbuying power since the 70′s. Think what that then, looks like for the average Joe, that now has to work three full time jobs to pay the rent… Good luck picking that úp!

  • markthetruth

    Market Watch Article today :

    Rising interest rates really aren’t that bad for stocks.

    Is anything bad for the Stocks from these Analyst anymore.

    If the Stock Market was a Human they would be telling you Cancer, High cholesterol and blood pressure , Kidney Failure , Dementia are all Good for you !!!

    They are so desperate to con people in the Market it’s getting Ridiculous !!!

    the end…

    • Chip

      I don’t think people really comprehend what could happen if rates start rising even more than they have been. Rates are still way under the norm. If they start really rising, the Fed won’t be able to hold them down. China, Japan, etc will start selling, they don’t want to lose any more principle. The only way we are keeping things going today is the printing of money by the Fed and if the rest of the world won’t accept our bonds, it will be lights out. We are spending at least 1 trillion more dollars than we are taking in and if that stops, no more food stamps, medicaid, etc, The End

      • markthetruth

        They are already selling, and if you look at the U.S. Debt Clock the Fed is trying to keep up with the selling by money Creation but also selling treasury securities at the same time.

        the end…

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    • AdvanceSpark

      Well, High Cholesterol was really good until medical industry decided they needed more customers. Cholesterol actually repairs damaged tissues and renews cells, and the higher it is, the better. Those who make it over 100 years are all high on cholesterol, and also children are high on cholesterol (they heal faster). Less cholesterol = more sick customers.

      • Ralfine

        It’s all in the dose.

        Vitamin D is made from Cholesterol by exposing the skin to the sun. Have too little sun, get brittle bones (that’s why the African men lost their tan when moving north 50,000 years ago). Have too much sun, get skin cancer.

        Testosteron is made from Cholesterol. Have too few testosteron, and get beardless men, have too much and get prostate cancer.

        Cholesterol repairs cells. Have too little and your body breaks down, have too much and your body clogs up.

        Just as with prices and interest rates, too much or too little of anything is not good. What we need is variety.

        I ditched sugar, butter, margarine, ketchup, cola, and other fizzy drinks. And increased the use of herbs, and different spices and teas. Herbs grow in the garden and the conservatory, and spices are good for trade.

        There are so many subtle tastes and taste combinations. And cooking is fun, especially when you can grow your own ingredients.

        And with a varied diet you get all the minerals and vitamins you need without the cravings for more and more and more of industrial food which is empty of minerals but full of energy.

        But even more important is water. Water isn’t just used for flushing food down. Water is used for energy storage. If you have enough water in your body, you don’t freeze nor heat up easily. The water can buffer heat gain and heat loss.

        If you don’t have enough water to buffer heat gain, your body expells water to cool the body down. Which only serves as a short term emergency measure. Because the body is then creating more water by storing fat.

        That’s the secret of quick weight loss, and so-called yoyo-diets. Fat people lose water and weight by sweating, but they gain fat at the same time. Fat people get fat by not drinking enough water in the first place.

        To lose weight effectively, they need to drink much much more water than they lose by sweating, urinating and breathing, and basically stop energy-food, so that their body can break down the stored fat. And also need to replace minerals lost through excretion. When was the last time you ate liver? (When I was a kid, eating raw liver and raw eggs was sort of a dare-thing.)

        Full body movement stimulates all blood vessels and capillaries and intracellular spaces and moves all the liquids there and get a better mixture for increased chemical reactions.

        The heart only works the arteries and veins, the capillaries are operated by the surrounding muscles. So, for effective weight loss, you just need to work all muscles, even those deep deep inside you, to get the nutrient soup moving. And drink 30ml (1oz) of water for every kg (2lb) of bodyweight every day.

        If you are really fat, there is no point to start running or using weights. Just move yourself. Look under that sofa and then reach on top of the wall unit in the kitchen. Twist and turn and get flexible. And listen to your tendons moaning and snapping. Test your joints and your breathing and heart rate.

        And that’s basically what you need for your economy, too. Get moving yourself. Build up some useful storage, get rid of unproductive storage.

        Reduce the import, use more second hand and recycling.

        Rediscover the beauty and richness of “old” stuff. Recycling and second hand stuff is basically preserving heritage craftsmanship.
        Get functional. Locally. Everywhere.

        And now I need to walk. The berries are ripe for picking along old railway lines. Good for stretching to reach the sweetest fruits, and contortion to avoid the nettles.

        • Mondobeyondo

          Or, you can stay at home and eat raw garlic cloves.*

          Garlic contains allicin, which is a potent antibiotic. The health and nutritional benefits of garlic are well known.

          Here’s the bad news: Unfortunately,allicin is only present in raw garlic cloves (not cooked garlic, or garlic supplements.) To get the full effect, you have to munch on some garlic cloves. Ewwww.

          * Do not go near famiiy or friends after eating garlic cloves for at least several hours. Do not eat raw garlic cloves near vampires. Your liver, heart, lungs and kidneys will thank you, but – your social life will pay dearly for it. You’ve been warned.

          • Ralfine

            Make juice from raw garlic, and mix it with tomato juice. Raw garlic juice protects you in flu season, by keeping people away from you. And you have lots of space in public transport. no pickpocket goes voluntarily near you. :-)

            The first glass of garlic juice is a great experience. It will hit you like a powerful drug, which it basically is.

          • El Pollo de Oro

            I’ve never eaten raw garlic cloves around Barnabus Collins. From what I understand, he’s not terribly fond of them.

      • JayJay

        I just read cholesterol problems are an invention of BIG PHARMA.
        One of the issues created and not needing intervention as you said.
        From all my readings, the meds used for this are far worse than cholesterol problems.
        My husband gets the statin drug free from VA.
        They sit on a shelf.

    • Hoody

      sounds about right…..I never had any stocks, bonds, IRA’s, 401′s , gold or silver.

      Just saved my nickles and dimes along the way and hoped for “High Interest” rates :)

    • TSA_TheSexualAssault

      The issue with “rising stock prices” is that very few Americans own stocks. Even the Americans who have a derived position in stocks, like mutual funds inside of a 401K or IRA account don’t have much wealth on average. Last I heard, the average middle-aged American owns less than US$10,000 in assets that could be called “retirement assets”, meaning a very few people own almost everything. This is a formula for trouble.

      Remember your oath.

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  • Syrin

    Soros, the anti-Christ himself just put a $1.25 BILLION put on the collapse of the S+P. He will then use his economic weight to manipulate the market to achieve his goal as he has done in the past when ruining other nations.

    • Michael from Australia

      I just found out that he bet against the Australian dollar (lately we were stronger than U.S.dollar). The following title from the internet.

      “Billion dollar Soros bet right on the money”

      “In what must be one of the greatest currency bets on the Australian
      dollar, George Soros is rumoured to have gambled around $1 billion
      dollars on a Reserve Bank rate cut sending the local currency lower.

      ….If the rumours are to be believed, the 82-year-old investment legend pocketed a cool $18.5 million from the play.”

      “…It looks as though Soros knew something local economists didn’t, with
      all 13 economists surveyed by AAP prior to the RBA’s decision predicting
      that rates would stay on hold.”

      • Antiehypocrite

        Duh – anyone could see that China was slowing which = Australia would slow = AUD would drop big time.

        Economists = IDIOTS.

  • K

    Michael you are communicating just fine. Look at all the other sites who repost your articles. If your message was not clear, they would not all be picking you up. Yes interest rates rising will be a big blow to the economy. Add to that rising food, rising electrical rates, and soon to be rising gas prices. Already a pretty dark picture. Now add in all the insanity popping up all over the Middle East and elsewhere. Between your articles and just world news in general. Anyone who can not see what is coming. Is choosing not to see.

    • smallergovnow2

      I agree with K Michael. You are spot on. Those that fail to comprehend cannot either one, do the math, or two, are under the spell of normalsy bias, perhaps a combo of both.

  • Kim

    One economist wrote that rising bond yields was an indication of a growing, more healthful economy, jobs improvement, et cetera. (Not that I believe it)

    If higher yields and higher interest rates were the norm in 2000, why is it so dangerous now? What changed?

    • General Patton

      We didn’t have 17 trillion in debt in 2000.

    • Rodster

      The national debt was around 6 trillion back in 2000, Today it’s 17T and if you account for both the Fed and US Govt cooking the books it’s in the range between 70-100T.

      That economist should be ashamed because the economy is NOT growing unless he or she thinks part time Taco Bell jobs are the way to prosperity.

      So no middle class, higher taxes, a declining economy, masses debt levels any world power has accumulated in world history. Oh and the world is entering the possibility of WWW III.

      What’s not to like about this scenario?

    • Chad3434

      Rising bond yields with a 17 trillion dollar plus debt is bad news. Housing market will tank once again, bond market will tank and stock market will tank. Just watch.

  • Uh-Huh

    i find it interesting they have done away with all the savings bonds that were so popular and we’re left with junk (electronic) to buy. They are talking about doing away with 30 year mortgages too — what aren’t they trying to change ? Amerika the Land of the Communist. McCarthy had it right…little did everyone know at the time.

    • http://loyal9.org/ Josh, Loyal9.org

      Your point about documentation no longer being on paper (a plot point in Michael’s novel) is especially trenchant in light of the actions in Cyprus where a flip of the switch is all it took to confiscate money. Check the language on your IRA’s. The law and those contracts say up front (in small print) that is not our money, but is in fact, the govt’s.

  • Prepper Website

    Michael,

    I would be curious to read your thoughts on how our financial situation can be “fixed.” What steps should be taken?

    I know that some economist are saying that it is a mathematical certainty that it will all fail, but I would still love to see you take a stab at it! ;-)

    Peace,
    Todd

    • davidbyrden

      Close your borders. Stop trading with China.

    • MichaelfromTheEconomicCollapse

      Todd:

      There are lots of solutions that could help things, but at this point our “leaders” are not even willing to consider most of them.

      Michael

    • Chad3434

      It can not be fixed and that’s our problem. It will crash and then we will pick up the pieces and start all over.

  • Douglas M. Green

    Absolutely right. And what about the banks failing too, whose bonds lose value and paying more to attract deposits than they receive in loan payments? Bond market, stock market, housing, banks and derivatives. At some point the fed will fight it with moar QE, but it could already be losing control. 10 yr. yield is key!

  • Zetili

    Wait until a huge amount of people end up being laid off and can’t pay the mortgage, car and credit card payments….not even whining from (female rights) groups or union coercion could prevent the job losses and insolvencies when SHTF.

  • Naples

    Let me get this straight: We need lower interest rates so we can keep borrowing.
    What happens when rates are zero and we keep borrowing?

    • Raymond Chow

      Then we can borrow forever. We’ll just accumulate the debt but we don’t have to service it. It will be up to the lender to say you owe too much and will not lend you anymore.

      But then again, all the world central banks are printing money out of thin air. The real losers are the producers and their workers because they’re exchanging their tangible products with worthless paper.

  • Gregge K Johnson

    I hope your Wrong Michael .

  • DJohn1

    The problem with taxes is who do you tax?
    Taxes are based on employment. If the average person is not making money by being employed then there is nothing to tax.

    It goes further. The market is what drives the Pensions of all older working Americans. When the market goes, the pensions no longer can pay people every month. 2008 meant a lot of people lost their pensions. The funds went broke.

    Social Security is dependent on people working.
    Medicare and Medicaid depend on working people.
    So until the situation we are in is straightened out and people go back to work in reasonably good paying jobs it all falls apart like a house of cards.
    Property values are dependent on people capable of buying houses. Taxes on that property is dependent on people owning houses with the bank. Most of our school taxes come from Real Estate. Most of our local government also depends on millage and taxes.
    Property consistently has gone down in value in the last 5 years. So even with current values on property the taxes are not there. Even with cheats like using last year’s values or even 3 years back, the money is no longer there to support local government. That means it is going broke.
    Detroit is where it is because of these facts. A whole lot of other towns are in the same situation only it hasn’t hit yet to the point where it is a bankrupt town.
    I would think that government would be trying to fix the situation and bring the jobs back. Obviously that is not happening. Sticking their heads in the sand seems to be very popular in political circles right now.
    I suggest it is planned. I have no proof. It just feels that way. If I am correct, the entire thing will come to a head somewhere around September 10-13, 2013. At that point, the entire house of cards might come apart.

    • nedro018

      Djohn,
      Can you send me links about the sept prediction? I feel similarly

      • DJohn1

        All I have to go on is a hunch. The hunch is based on the 9/11 connection with the Bible that is described in a fictional novel.
        That in turn is based on a parallel between 9/11 and the prophet Isaah in the Bible. In this book, the Israel of ancient times is compared with what is going on now with America.

        I am looking more at a series of coincidences that seem to form a pattern.
        I have no real links to go on. It is all a hunch that if this financial situation is going to come to a head it might just happen somewhere around 9/11 in September of this year.
        The other reason is that it is just prior to November elections. It is just enough time to make all sorts of reactions happen.

        • Joel Peeters

          DJohn, you are probably speaking about the book “The Harbinger” – there is also a video on youtube speaking about it which is “The Isaiah 9:10 Jugdment”. The similarities are quite interesting.

          • DJohn1

            You are correct.
            After wading through the poorly edited material which consistently repeats itself over and over again in various forms, the book does have some very interesting points and predicts just such an economic collapse.

            It parallels what is actually happening with the fictional book.
            I find that to be very interesting.
            There is a consistent pattern going on here. The only thing missing is an actual date that it might happen.
            Another consistent coincidence is the prep being done by the Federal government for a potential disaster with FEMA and other agencies.
            Someone is putting a lot of money into the idea we may face a general uprising this fall. The interesting question is “WHY?” An economic collapse is a likely answer to that question.

            Personally, I think it is more likely we might face WWIII.
            That is opinion not based on any real facts.

          • Brendan

            I wouldn’t call it a fiction book more just a representation of the facts and a warning for America’s future if we don’t repent from our sins and turn toward Y’HW’H individually and as a nation.

  • VegasBob

    Foreigners aren’t stupid. They see that idiot Bernanke printing trillions of dollars to cover all the hot checks written by the Federal Government, Fannie Mae and Freddie Mac. So foreigners are selling their US Govt securities just as fast as they can. That’s why interest rates are skyrocketing – nobody wants US Govt paper, because people know it won’t keep its value.

    Face it. Bernanke is nothing but a counterfeiter. Every dollar he creates out of nothing makes all of the existing dollars worth less.

    What is he going to do? Forget the taper talk. Bernanke will keep printing because stocks will plummet if he stops. And as he keeps printing, the dollar will be worth less and less. Eventually the dollar will be totally worthless.

    As for hiking taxes drastically, that won’t work. Historically, the US Govt has never been able to collect more than about 20% of GDP in taxes. So what’s going to happen is that Govt benefits are going to be cut, and cut drastically. We just haven’t got the money and high interest rates are going to force us to stop borrowing money that we can never possibly repay.

    • Chad3434

      The only good thing that can come out of this is, Obama and a ton of politicians will see what tar and feathers look like.

  • Richard

    “Let us hope that the yield on 10 year U.S. Treasuries levels off for a while.”

    Another excellent, article, Michael. Well done.

    “Hope” never changed the price of anything. Only supply and demand can do that.

  • JSinGA

    So what do you do to prepare? What specifically are preparations to deal with the impending doom?
    What physically to do you?

    • Ralfine

      Prudent is to think in August of the coming winter.

      A household book is a good idea, where you write down your expenses and incomes, and projections for the coming year(s) up to and including retirement.
      I put all expenses into a little excel sheet, what I bought, which shop, how much it was, and price per weight (for meat, veggies and fruits, for example). Just realised my favourite chicken meat rose by almost 50% in price from April till now.
      Testing different suppliers now.

      (Could this be a result of a price rise in wheat, or just profiteering by that supermarket chain?)

      My excel sheet also helps me with my diet. If the expenses for junk food are far higher than the ones for veggies, that’s a good indicator for corrective action.

      With that excel sheet I hope I can find my annual need for supplies, and find savings for bulk buys and storage items.
      Luckily, we never throw food away.

      And then, I am testing different types of supplies. For example soap. Storing soap is easier than storing shower gel. And soap has some other advantages, like resistance to fungi.

      I am not into lotto, gambling, horse racing, stock markets.

      I also just realised something else. In England many people do not get paid when they are not showing up at work. Therefore it is important to have transport that gets you to work in any weather and any road conditions.

      It isn’t important how you do in good times. Everybody can do that.

    • Joel Peeters

      It’s probably not the only solution, but if people can afford a farm of some kind (not too big) it could help – at least to eat (maybe make some few money or barting food for goods or services).

      I read in the past, that during the Big Depression years of the 30′s many people went back to farming (even for a short while) so as to be able to have something in their stomach.

      Of course, this is one solution, but we are not really in the 30′s anymore – the political and financial landscape is quite different, and I don’t really know how the American people will be able to cope with this crisis considering the differences i just quote.

    • atmajnana

      Survival food needs can be taken care of for pennies. Simply sprout. Sprouts contain 10-30 times the nutrition found in the mature vegetable. Also, spend $30-40 and purchase 1500 Moringa seeds on Amazon. That will take care of all your nutrition needs for a lifetime. The tree can grow 20-30 feet in a year. The foliage from the seed after four weeks of growth is prodigious. The Moringa tree is truly the staff of life for Third-World countries. The bark from the tree even purifies water. It is a tropical tree, so indoor growth is the way to go for the Northern Hemisphere. Just keep trimming daily and eat the foliage. With these magic seeds (no beanstalk to the sky; that’s Jack’s trip) you can forget about supermarkets. This is a practical start for you.

  • Renee

    Friday I was laid off. The last time I was laid off was during the whole stock market crash of 2009. The dental parts manufactoring business is struggling a lot of small labs are failing. Some due to competition but many failures are due to the economy and the costs.
    My husband and I are very hard workers and very frugal so we will weather through it..again. I want to thank Michael and this site for keeping me on track it is hard to be positive but we are better off then most. Regards.

  • cherylmeril

    We all need to get Michael’s book!

    • MichaelfromTheEconomicCollapse

      Thank you for the plug. I hope that people are enjoying it. :)

      Michael

    • mtgrandma

      I got it and it is great!

  • Bosnian Serb

    We must look for the opportunities in upcoming mess. For example, look at price of Google stock and how it has gone down almost 50 dollars in a very short period of time. If some smart investor spent purchased Google Puts he/she would be well off now. I see this upcoming stock market collapse the opportunity of a life time.
    Look at price of Tesla stock-up 6x in last 3 months. I know one person that made killing on that stock and is able to purchase a brand new Tesla car. If you do not have much to spend Micheal suggested to buy silver when it was $19 not long ago and silver is over $23. He also suggested that gold is good investment at $1200 and since then gold has gone up over $1370. Also, if you have some cash in upcoming collapse of housing market then great for you! Why worry so much about an interest rate? If you do not want to invest it is likely that your bank account will get bigger with the higher interest rates on your savings.

  • Hoody

    I been waiting over 5 years now for interest rates to rise!!! This 1% on CD’s or MMA’s sucks when your on fixed income and no longer employable. So yeah get the rates UP! I may not make money, but at least I can stay even till I’m done……….

    • Joe Kleinkamp

      The problem is that rising inflation usually stays ahead of rising interest rates. When you’re making 6% on your savings they could be losing 8% of their buying power.

      • Hoody

        Doesn’t matter, like I said I won’t make any money, but at least keep up sorta, not like now when inflation is a lot higher than stated by the BLS or Bernak. and getting 1% when inflation is running most likely at 8 or 9 or worse

        I remember 13% rates when inflation was @20% so what.

    • RarefiedSnotress

      I’ve been waiting too, Hoody.. It should be a nice change.. bring it on! :)

    • El Pollo de Oro

      Hoody: Being a small business owner, I have a SEP IRA. I used to get very good interest rates on long-term IRA CDs……..not anymore. Thanks to this prolonged period of abysmal interest rates, many self-employed people with SEPs will have to either seriously delay retirement or forget about it altogether. Of course, that abomination known as the Federal Reserve wants people to put their retirement funds in the stock market, but the roulette wheel in Atlantic City is much safer.

  • cherylmeril

    More than financial danger Michael mentions he can’t nearly express we’re in, Americans are in severe spiritual danger. It’s extremely serious, without God’s protection people are doomed, and God is going to loosen restraints on Satan because America has been removing Him from its culture. Without His Word, there is no hope and the average American is too casual in their approach to life in general. Jesus Christ saves, He is real and available 24/7, people need to accept Him into their lives now!

    • beezh

      Amen, sister. You are exactly right.

    • Chad3434

      Amen!

  • seth datta

    The bankers’ and their shills are crooks for precipitating the problems we see today. They are behind the economy collapsing globally as well as being involved in the Egypt uprisings. Their goal of a one-world currency by which they will maintain control over the population of the majority of the world is an evil agenda and must be stopped. Unfortunately, it seems many people are too preoccupied with the Kardashians etc.,. to care, until its too late.

    • Brendan

      we need to get back to the Bible in our culture and I don’t see how that’s going to happen unless we have different leadership

      • Chad3434

        God has away of getting peoples attention.

  • A D

    It makes no difference the only ones who will be crushed are the ’30%’ of people who actually work.
    The rest of the people on ‘freebie’ programs, gov workers could careless.
    The Gov will just print billions or trillions of dollars from thin air to pay interest. Until they decide it is time to pull the plug and crash all of it.

  • Voodulounger

    What is going to happen if your paranoid behavior continues to rise rapidly? We’ll need to take you to the Voodu Lounge.

  • Kent Harris

    My dear friend, Michael, the disaster that will bestow us will completely destroy us. The reality is that whether we look to the left or to the right the country will face such dire consequences that we will end up in a civil war. We believe that we are immune to it but in fact we are not. The Middle East is in the midst of completely unraveling before our very eyes. We have not heeded God’s warning to turn back. The spark that set the whole world ablaze is when the world economy collapses and all bets are off. Fire and brimestone is nothing compared to what is coming down the pipe.

  • TSA_TheSexualAssault

    Money will concentrate into the hands of the powerful. Issuers and first-users of money will have very-great buying power.

    “Regular” people receiving wages for work, running/owning small businesses, people with fixed pension incomes, and people holding “safe” bank accounts or low-yield bonds will be constantly nibbled at and have purchasing power eroded (at about double the admitted rate of inflation).

    People who think that their house is a store of cashable value will be disappointed. As inflation makes interest cost higher, sell-price (the amount the seller actually gets) will drop, so that the monthly payment to the buyer is the same as before. This will make “short-sale” the new standard to sell a house, as the mortgage amount will be much higher than the selling price. Old owner gets no money and credit wrecked. Why bother? Just stop making the mortgage payment and keep paying utility, fire insurance and property tax, because the bank can’t prove an ownership right in the house due to the MERS fraud. House is a long-term consumer item, like a refrigerator and washing machine, and should be no more than 5 years of current income to pay off as well as no more than 30% of monthly income.

    What if our foreign creditors want to get paid off, or more likely, want to buy real goods with their Dollars inside the United States? Shortages & major price increases.

    Then there is the pension crisis. Politicians “negotiated” with employee unions to make a system that can not be sustained, thus is fraud.
    Everyone ought to get cuts, or a bunch of people will get nothing. Money that does come will have little confidence and buy much less.

    For various scenarios, look to Argentina 2001, Germany 1921, Yugoslavia 1990′s, Zimbabwe (ongoing). Expect more, bigger, worse in the USA.

    At some point, truck drivers will not be able to put Diesel in their tanks (unwilling to pay themselves, company checks bounce, filling station requires cash, etc.) and the food will rot on the road. The Battle for Aisle Three will proceed when word gets out that EBT is no good and cash-only is the rule to get food. Watch for foreign troops in blue helmets to “keep order” and “provide aid”.

    Get in good physical shape ASAP. PT now, PT more. Have sturdy boots, gloves, warm outdoor clothes, independent supplies, as if you need to recover from a Richter 9 earthquake. Prepare to defend and work hard, with little fuel or food input. Remember your oath.

    Cheers.

  • Patriot Alice

    This is why the Feds will continue to print, print and print the can down the road. This is all because we didn’t let the market correct itself in 2008…Now we on the road to disaster for the foreseeable future….

  • Theodor

    Please explain me, how does the 10 year yield affect the interest the US is paying on already existing bonds? Shouldn’t it affect only the interest on new bonds?
    Also, are the US Treasuries inflation adjusted or not? Does anybody know?
    Thank you!
    Theodor.

    • KCTed

      Selling Treasuries is how our government borrows. Our economy would collapse if we stopped borrowing, Not only can we NOT pay down the national debt, we have to borrow to just pay the interest.
      We can’t stop borrowing. However, we can add ObamaCare (which has near tripled in cost since originally proposed). Add to that, a dozen “foreign military interventions” which we also borrow to maintain, and you can clearly see how important low interest is.

      The reset will be harsh, like slamming into a wall. My opinion is probably worth nothing, but I would recommend Americans put back at least 30 days long shelf life food, water and daily essentials… to soften the blow of collapse.

      • Theodor

        Thank you KCTed, but you have not answered my question: is the change in 10 year yield affecting the interest on currently existing bonds (all 16 tril. public debt), or only the new debt, that is, money borrowed after the 10 year yield has changed.
        About preparations, how about a piece of land in the countryside, US has a pretty low density, there should be plenty of affordable land out there, far away from the big cities.
        Thanks,
        Theodor.

        • sven

          you own a bond at 2% nominal interest rate. the new bonds are 3%. in theory you now would want to sell your 2% to roll into a 3%. as the the interest rate goes up, the value of the bond goes down, so you have lost. the gov. loses cause now they have to pay a higher interest rate at 3%. if you do not sell, you continue to get the interest payments till the bond matures, but it is lower than the new bonds. so as the articles says foreigners are selling the the 2% and not buying the 3%, so that market is drying up. to induce sales, you offer a bigger interest rate, but the buyer has to believe you can afford to pay the interest payment till maturity.

          land in the countryside? my question too. if you pay cash, you have no mortgage, but now you are liable for all the fees and taxes the various government entities will impose. i think the upside is now you can grow a garden, have some edible animals, stock prepper supplies, and wait … it is written somewhere, the patriot act?, that the government considers you a terrorist if you have more than only a few days worth of food hoarded, and that in a national emergency they are allowed to come and get it. so hide your supplies and keep quiet about it. pay cash, no receipts for them to track. comments along this line are very welcome.

  • Mondobeyondo

    Arghhhh! Stop scaring me!!

    If interest rates rise, the payment for your debts (all debts, yes, all y’all debts) are going to rise. Mortgage debts. Student loan debts. IRS liens. And all that other stuff too…municipal debts, library card debts, etc.

    I hate to tell you this, but – your government is broke. Flat broke. You say, “But I paid my taxes every year and now I’m broke! We gave the government our money, how can they be broke?” Ummm, yes, you are. We ALL paid our taxes, and we ALL are broke. . “But how can that BE?” you say. Have you checked the U.S. debt clock lately? It explains a lot. In the famous words of Will Rogers, we’re driving to the poor house in a Rolls Royce.

    How many millionaires live in your neighborhood? My guess is, about 0.00001%.

    So, what to do?

    #1.. Get out of debt. Get. Out. Of Debt. NOW.

    That option is difficult, to say the least. But it is essential. Everything today seems to be based on your credit rating score (and that’s scary in itself).

    Most people can’t get out of debt, not without tremendous sacrifice. (Count me in among those!)

    #2… Get out of debt. Get. Out. Of Debt. NOW!!!!
    Get the cheap ,no respect job. Apply to be a janitor. Clean those bathrooms. Scrub those floors. (Be warned – even janitorial jobs are hard to come by these days….) Just earn enough to keep the wolves, I mean creditors and bill collectors, at bay, for a little while.

    Ever know why financial responsibility is never taught in schools? “Yes Mondo, because that’s the PARENTS’ responsibility!” Yes it is. But what are parents doing to teach their children? In many cases, nada, zilch, nein, zero. Education does not stop when the school bell rings at 3pm. You know that, right?

    • Chad3434

      This is why I am not in debt and this is why our government should not be in debt. This is why I own some land and know how to plant. I feel sorry for the ones who live in asphalt cities. You can not grow a tomato through asphalt not that they would know how to grow on in the first place. Really going to get bad for the ones who have not been paying attention.

  • Patriot Alice

    I think it’s a good time for us all to stick our heads in the sand..I wonder if I can afford the sand during hyper inflation, I’d better go and buy it now….

  • 2Gary2

    Michael–I think the false recovery we are in is 100% based on the low interest rates. We are in a world of hurt if they rise. We need always remember that the gov stats are fake so it is worse than the official media states.

    • MichaelfromTheEconomicCollapse

      Gary:

      I can definitely agree with you there. If rates go up we are in HUGE trouble.

      Michael

  • JustanOguy

    Interest rates are not going to rise much more to begin with as long as the FED and BRA is in charge so don’t sweat it..

  • Trailer Park Investor

    We could hit 3.5% in just the next month or two. Sounds like the end is closer than we thought. I think when it hits 3.5% it will let the cat out of the bag so-to-speak and then all hell will break loose and then it will fly to 6% in just days a week or two tops and then it will be a roller coaster ride to the bottom, fast, furious with NO landing in sight. Tragic news will be followed by worse news, that will be followed by catastrophic news and then the news after that will be talk of Economic Armageddon, Economic Appocalypse and it will be a free fall to the bottom from there.. That’s when grocery stores run out of food, and soon after that we loose power, we loose power we loose everything.
    Things are going to get real ugly real quick,
    Hell on Earth is coming, Get Ready…

  • wally

    Its all a house of cards. Tiger just ran in the house and is about to bump Greg which will cause the collapse. Remember 2008 when Marcia’s bracelet almost caused the house to come down?

    Hey the FED is not printing physical money. It is all on paper. Worthless paper. The debt hasn’t moved for almost three months? Why because if it goes 20 million higher the government and the agreement Obama and congress made is in violation and Obama is breaking the law.

  • Stephen

    EWI analysis on the Dow Jones Utilities shows a
    HUGE NUMBER THREE down dead ahead.

    and I DOUBT the crack point is 3.5 % I think it
    is RIGHT AT 3 %………very close to current
    levels.

    Interest rates have JUST STARTED to climb.
    Elliott Wave says they will be going ALOT
    HIGHER….

    Stock bulls have been warned over and over
    and they never listen…

    OCT 2013 CRASH, may be sooner.

    Stephen >>>>>>>>>>>>>>

    • Chad3434

      Read where Buffet and Soros and a few more multibillionares are running for the timber on stocks. When they run look out.

  • davidmpark

    Okay… so what’s the most important thing to focus on right now. Best guess is to prepare for the usual shortages in the usual ways, but also to get ready for intense austerity in the years ahead.

    From what I’ve researched about Greece, Zimbabwe, Yugoslavia, Weimar Republic, etc. is that higher debt yield percentages always accompanies austerity measures of higher taxes, cuts in gov services and offices, or a mix of both.

    We are going through this now with the taxes, but they are hiding the cuts in services very well. Obamacare is a good example. With the treasury interest rates going up, they passed a program that raises a lot of taxes, cuts services, and then they publicly claim it does the opposite – taking more money and spending it on debt payments instead of services.

    Look for more austerity measures when the 10-year treasury interest rate goes higher. Mike’s right: 10-year treasury’s are the canary in the cave.

    With that, it might be a good idea to only invest a little into gold and silver, and more into repairable machinery, tools, land, seeds, small livestock, and skills in make do and mend. Gold and silver isn’t the end all of saving yourself – especially when there’s scarce anything to buy with it, or have sellers capable of accepting it. Bartering goods and services is what many will be using when SHTF. These good times won’t last much longer…

  • Orac4Prez

    What happens when the Federal Reserve goes Bust because they arent getting paid the interest due to them, and the assets they hold are devalued?

    • Joe

      They print more money and go out for koscher appetizers and french bordeaux. You on the other hand might need to work a bit harder to buy your vittles with your debased dollars.

  • Joe Kleinkamp

    I think everyone should take $10,000 out of their savings and book a nice vacation to sit and reflect on how well we’re doing. If our president can enjoy his summers (and his falls, winters and springs) we should be able to as well. Anyone have a problem with dropping 10 Gs for a nice Obama style week?

  • Klayt

    Most people don’t care because its too serious a topic for them to even entertain as possible.

  • Mondobeyondo

    Turn down the lights, the party’s (almost) over….
    They say that allll… good things must end…

  • K

    Expensive weapons will break down in less than a year. David more than you might think, will not be working in 2 months. I know people who have spent silly amounts of money, on weapons, and ammo. You know what they have to clean their weapons? One 19 dollar walmart universal cleaning kit. The one with the tiny little bottles of every thing you need. I figure their AR systems will go through that, in about a month. Shortly thereafter their AR systems will not be working.

    • davidmpark

      I agree with the watmart cleaning kits – they’re trash. The M1911 and all those AK-47′s will last about a year. AR-15′s and Cobra firearms I agree won’t last very long.

  • sven

    michael.i keep up on your writings and you always say we should prepare. but how? become a hermit prepper on a mountain top waiting for the end? hoard gold and hard asset like land (which will be taxed), food, ammo, etc? please write and article on your thoughts on this matter.

  • Rufus T Firefly

    Our Obamessiah will magically fix any problems that occur…as soon as he finishes his vacation at his billionaire puppetmasters’s estate

  • guest

    The good news is: When the collapse occurs, women will have to rely on their only skill. No more lies and propaganda, no more forced tokens to perpetuate the myth of equality:) The bad news is : We will have to start paying for sex again :(

    • DiscouragedOne

      What kind of a sick person posts something like this, and who are the idiots who voted it up? I bet the idiot who posted this has no marketable skills and I (a woman) have many more, and I don’t need to sell my body you idiot! Get a life!

  • MichaelfromTheEconomicCollapse

    Thank you Mark. :) And I hope that people will check out your site.

    Michael

  • seth datta

    The PrezzyDent likes being part of the NWHo and wants to QE us back to the days before the Magna Carta. Hence the rise of the police state and NSA control grid.

  • http://www.FreedomPS.ca/ Doug Loewen

    Now is the time to free from the bondage from debt and taxes. The banks and government are about to get a whole lot uglier to their slaves.

  • A D

    Everyone will stand before Jesus, regardless of people who deny it. Man turned his back on God now you can deal with the consequences.

  • Cyber Revengeance

    i really don’t understand derivatives. if its really there such a huge amount in derivatives then why are economists not worried about it.

  • Piglet

    [Unfortunately, there is no way that the party that the U.S. government has been throwing can continue without foreigners buying our debt.]

    “Buying debt” sounds so much more respectable than “borrowing money” or, more accurately, “borrowing money which can’t be repaid.”

  • CraigG

    Here’s a question. While the 10Y rate has been rising…the short term rates seem to be stable. For example, the 6 month LIBOR hasn’t budged in months (sitting at about 0.40%). Why isn’t upward pressure being put on the LIBOR given what’s happening to the 10Y rate? Is it possible that central banks would put focus on keeping short-term rates low to keep liquidity in the markets…or will short term rates soon start rising as well?

  • KEG 1967

    They just suspended trading on the NASDAQ and I beleive that is the exchange that derivatives are traded on. The bubble is bursting. You had better get to the bank and get some cash out. Banking holidays are next.

  • http://www.courtyardoceanfrontnorth.com/virginia-beach-courtyard-meetings/ Business Retreat in Virginia

    nice article………….

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