Negative Bond Yields

[errolanderson]

Well done 2 1/2 minute slide show explaining why bond yields have gone negative in 11 countries. This is the root of central bank money printing or more correctly 'the global currency war'.

www.slideshare.net/financialtimes/negative-bond-yields

[crusher]

"Some cash will have to burn whether we like it or not" Hope its not mine.

[errolanderson]

crusher . . . that was quite the final statement in this slideshow that cash has to burn, but so utterly true (IMO) due of near-sighted central bank policies with no end-game insight.

[ado089]

The sad thing is the world could have taken it's lumps in 07/08, seen a heavy correction which would have allowed a re-balance and restructure favoring the efficient and innovative and we would be well on our way to a sustainable recovery all be it at a lower valuation. We're still going to get there but now instead of shitty asset values we'll have shitty asset values and a mountain of debt to go with it.

[errolanderson]

ado agree . . . had central bankers not been involved, global markets would likely already be in-recovery after the crash of 2007-08. Writeoffs and bloodletting would have run-its-course. But central bank policy has just kicked-the-can making the debt mess worse; an increasing danger to markets(IMO).

Which begs a question; what's the role of the central banker??

[ado089]

The stimulus and much less of it should have occurred after the dust had settled to help with the reboot, not before preventing it.

[bucket]

If they had invested in infrastructure that this country desperately needs we would all be better off.

Instead they advertise.

People can run China down on their spending but they created something.

Canada has built nothing lately.

Piece meal gazebos doesn't cut it.

[errolanderson]

Central bankers do nothing to generate economy. But their policies can create income inequality within society.

They can do only two things . . .
1. Adjust their lending rates.
2. Print money

[tweety]

Ado, pretty sure we'll be saying that in 2021 that in 2015 it should have happened. Its like the ones controlling the money have gotten so good at it there is no end to the downward spiral.

[ado089]

Likely. The sad thing is that global demographics will start turning around in 2021 and we'll still be saddled with this mess.

[errolanderson]

U.S. Fed are meeting right now. Also, suspect no rate hike for Sept and possibly for Dec as well. Too much contagion risk both within and outside U.S. borders (IMO).

Bond yields have turned negative and global interest rates continue to decline.

[Rareearth]

Just thinking out loud.
Errol you mention the currency war, that's exactly what's happening. If the usa raises interest rates what happens to the usa economy vs other economies?
- usa exports go down
- imports and merger acquisition activities increase. Usa buys strategic assets at a lower cost
- other countries economies faulter, can't keep up to usa. The loose or mobile money cones into safe haven usa for the extra 1/2% interest rate



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[errolanderson]

Rareearth . . . if rates are hiked this year, the U.S. dollar continues to rally, crude oil, Cdn dollar, gold drop further. But . . . U.S. exports and manufacturing are being punished. U.S. GDP is stalling (IMO).

An ill-timed Fed rate hike could stall the U.S. economy and then what??
The Fed has what tool to re-start the economy? That's the risk (IMO).

This is very high-stakes global poker game . . . .

[Rareearth]

No question high risk.

There will be winners and losers, there always is with government policy. I think what's the most important is why, and not all the cause and effects.

I agree it seems suicidal, they want and need inflation to grow the economy so they raise interest rates to slow it down... There has to be other motives.

You didn't mention the billions it would cost the fed to fund the delicate with higher rates, it's also suicidal. And again what's the motive or end game then? I've heard very little on this. As the great one once said " go to where the puck is going to be"
Once we know or understand why they want higher rates then every one can adjust accordingly.
I doubt they will raise rates anytime soon.

[errolanderson]

Rareearth . . . my personal belief why the Fed wants to hike rates is because of the heightened stock market risk. To me, Yellen wants a controlled correction in U.S. equities, not an out-of-control crash. By hiking rates just a bit, the top may be put into equities, but not an outright sell-off. An opinion . . . .

The Fed has built their own nest . . .