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Monday, March 01, 2010

THIS IS BIG!!! Our bond auctions are falling apart

There are times in life when one witnesses something so outside the scope of normal experience, that at first you don’t see it.

Captain Cook’s diaries tell us that upon first seeing his ships offshore in Australia, the aborigines expressed “neither surprise nor concern.” Cook notes that it was not until he and his men approached the shore in smaller, more familiar vessels that the villagers reacted, arming themselves as “the sight of men in small boats was comprehensible to them: it meant invasion.”

Well, I had a similar experience during yesterday’s bond auction..... Below is the entire article. This is incredibly big news.

Something Very Strange Is Happening With Treasuries -- Seeking Alpha


usafhockey said...

I'm concerned for what this means for the Summit's new purchase of their structures using bonds vs traditional bank lending... God's bigger than the market for sure... but just saying....


Snark said...

Individual entities using bonds are not the problem. A "bond" is really just your word that you will pay back the moneys someone has lent you. Summit is not brokering federal bonds or municipal bonds. They are simply borrowing money from individuals, and swearing (that is what a "bond" is, you are bound to pay it back!) to pay back with interest.

The value of a bond depends on how trustworthy the individual who is "bound" to pay it back is. Summit is as honorable as any person or entity I know of.

The problem with long term bonds (I do not know what maturity dates Summit is issuing) from whoever is that you have to have faith in the underlying financial structures for them to make sense.

I have no doubt that for every dollar Summit borrows, they will pay back every dollar plus interest.

The real question is, what will that dollar be worth when you get it back? A dollar "invested" in a 30 year bond of any type back in 1980 is now worth about 73 cents. Even if you add the 10 per cent interest to it you would have gotten in 1980 (interest rates were high), it was not a wise investment, and bonds are INVESTMENTS.

This is why inflation of a money system is not just unwise, it is SYSTEMIC EVIL, no less than a warfare state or physical oppression. It is also a targeted evil, in that it affects mostly the poor and the elderly who have no way to keep up with the loss of purchasing power of their money.