Eurozone bond prices have entered a Kafkaesque world of negative yields Photo: Alamy
Jeremy Warner, The Telegraph: Negative interest rates put world on course for biggest mass default in history
More than €2 trillion-worth of eurozone government bonds trade on a negative interest rate. It's a bubble that is bound to end badly
Here’s an astonishing statistic; more than 30pc of all government debt in the eurozone – around €2 trillion of securities in total – is trading on a negative interest rate.
With the advent of European Central Bank quantitative easing, what began four months ago when 10-year Swiss yields turned negative for the first time has snowballed into a veritable avalanche of negative rates across European government bond markets. In the hunt for apparently “safe assets”, investors have thrown caution to the wind, and collectively determined to pay governments for the privilege of lending to them.
On a country by country basis, the statistics are even more startling. According to investment bank Jefferies, some 70pc of all German bunds now trade on a negative yield. In France, it's 50pc, and even in Spain, which was widely thought insolvent only a few years ago, it's 17pc.
WNU Editor: Everyone knows that this is not going to end well. The only question that remains unanswered is .... when will this happen?
2 comments:
This is quite correct and has been for quite some time. In other words, this revelation is nothing new for anyone who has been following this. I've been aware of this problem since 2003.
The best case scenario with for America with regards to the default, it this will finish America as a major world power. Western European nations will likely be pretty much done as major influences on world affairs as well. With that said, America will be the biggest loser in this and there's nothing that can be done to prevent this at this time.
Russia and China are the world's dominant powers and will be for the foreseeable future. The best approach for American, Western European, and Eastern nations is to realize this and act accordingly. For it's part, America should be negotiating in earnest with the leaders of Russia and China to try and ensure a "soft landing" when this does happens.
2003?
I would have to say it was 2008 to 2011 for me.
There is no way this ends well with 600 trillion in derivatives and 11 trillion in tangible assets. 60 minutes covered this.
If savers take a haircut at the bank that means people cannot retire. So 401Ks take a hit as well if it goes like Cypress. I do not see property taxes going down. So some people will be under water due to know fault under their own.
It is to the point that where people always have to follow the financial news and all become chartists. They all have to look for the next bubble and see if it will capsize them. The bubbles seem to be nearly as frequent as the business cycle.
i have seen charts where the growth of the money supply to this extent started under Volcker. Maybe I need to look at those charts again.
Every Fed chairman seems like a pygmy compared to the one that preceded him.
Michelle Bachman was right in that the big banks should not have been bailed out. Have they deleveraged? Has giving them money helped non-bankers?
It occurs to me we spend more time on AGW models than we do on economic models. to bad they have adjusted temperatures at least 3 times in the data sets. Nothing like adjusting the temps earlier in the 20th century down and the ones after up.
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