After almost five years of severe warnings that the BOND market would take a dive, it did. This set off a chain reaction bond selloff that took the MOM AND POPS down with the mudslide. Funny thing is they don’t even know it yet. It was a calm event. It capped off a week of volatility in which buyers went home early. Nobody fights a bond market collapse. on a Friday.


Elderly Burned Alive and don’t even know it yet!

The news started off so great. Forget the millions who remain unemployed, the Gov showed an increase of 200,000 jobs in January. It also showed an increase in wages. Trump was in the middle of trying to take credit for it when the bottom fell out of the market. Trump had bigger fish to fry as he continues his attack on the FBI, saying,”People should be very very upset.” The Black Swan Presidency has a lot of “you people” upset. The stock market is only emulating the kind of twitter cyclone migraines in Trump’s head.

What really happens to a debtor nation when their Treasury Bonds collapse?

Look no further than Japan with their 30 years of 2% unemployment. STAGFLATION. Thanks in part to the Dollar Reserve Currency, the USA has been able to export most of its inflation to the rest of the world. Thanks to Trump, debt is rising faster than at any time in US History. RINOTAX alone chalked up $1.5 Trillion in the few minutes it took for Trump to sign his enormous gold-plated signature to a bill he never read.

Then in DAVOS, Trump warned that the USA was moving toward protectionism. That’s code for saying prices in the USA are about to inflate. No sooner than Trump returned along from his DAVOS trip without Melanie who was sulking in a spa in Florida, Trump was getting flapping seal applause from Paul Ryan over Trump’s $1.5 Trillion infrastructure plan. Remember that Paul Ryan’s Trust system comes from his family’s road construction business.

When Bond prices fall, their rates rise. This is not good for a debtor nation because instead of adding just 4 trillion a year to the annual debt, the debt service alone adds another trillion. Pretty soon every dime of tax collection gets used to pay off the interest on the accumulated debt.  Since the Government will need to borrow more money, it will have to pay more interest on the Treasury bonds it writes in the future. This creates a vicious cycle of the kind you have seen in Venezuela.

Venezuela can’t get away with it but the US and its Dollar reserve can spread their debt globally. Remember the monopoly money that comes off the press with warm ink is spent first by Government. It spends fine until the public wakes up one morning and is buying grapefruit with a wheelbarrow full of money. That won’t happen now because you have debit and credit cards so you never suffer the physical feeling of inflation.


So who has Bonds?

All the elderly fixed income and pension funds across the USA. Passive investing once again results in the great moment of awakening. Most elderly who have managed money accounts don’t even know they have been turned into retirement income fertilizer.


Will this get worse?

Oh heavens no. Politicians and even the Fed will cheer everyone with how good things are going. Why worry about a bond market haircut. Inflation is good they will say… like Cornflakes in the morning.

They will say earnings have been decent. But they won’t say the earnings are rising from inflation. No… they won’t say that. You might get the idea this is all monopoly money.


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