The 5,000-Year Government Debt Bubble (Should investors buy the most expensive bonds in recorded history?)

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The Wall Street Journal posed this intriguing question: Should investors buy the most expensive bonds in recorded history?

Amazingly, governments have managed this feat even (low historic bond yields) as they have become more indebted and even as slow economic growth undermines their ability to repay. Such conditions normally suggest a less creditworthy borrower and therefore a higher interest rate to compensate investors for the risk. But sovereign debt has become more expensive. Governments have succeeded in making their bonds more expensive in part by printing money and buying the bonds themselves via their central banks. Commercial banks are all but required to buy them too.

Yes, the US Treasury bond bubble began in September 1981 when the 10 year Treasury yield peaked at 15,84%. The Fed Funds Target rate peaked at 20% in May 1981, And the bubble began its great inflation.

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Of course, our own Central Bank (The Federal Reserve) has helped drive the purchasing power of the US Dollar down from $10.2 in 1913 to a measly $0.42 in June 2o16.

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And M2 Money Velocity (GDP/Money Supply) peaked in 1997 and it has been all down hill from there,

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So, declining labor force participation, massive money printing begat slow economic growth. And the US Dollar Purchasing Power keeps lessening. And we are in the greatest bond bubble in history.

Here is a photo of The Hindenburg flying over Wall Street.

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What we will be saying when the bond bubble bursts. Oh the humanity!

 

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