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Big Bear Bond Trend

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When we hear that the market was up or down, instinctively we think of the US stock market and the Dow.

Yet, according to the SIFMA (Securities Industry and Financial Markets Association), as of July 2025 the global fixed income markets increased to $145 trillion while global equity market capitalization increased to $126 trillion.

In this post, we will look at long- term bond trends from major nations at the top of the global bond markets. We must all remember that the history and science behind a highly leverage system of debt-based money must be understood in context of current commentary and events.

The Historical View

First, we will look at the 30-year US Treasury bond market. The chart below was pulled from my January 2024 Best Minds Inc blog post.  

[Source: Macrotrends: 10 Year US Treasury Bond Yields, 1962-2025]

No one can look at the three charts above without seeing that the lowest yields in the U.S. 30 Year Treasury bonds took place in 2020. If you went back since the 1700s in America history, you would know that in the fall of 1981 US Treasury yields reached their highest EVER. What were you doing in 1981? I was working on my master’s degree, with no clue that a major historic event was taking place.

As yields moved lower, borrowing costs declined. This made the older bonds in this trend more valuable; holding a 10% bond became more valuable than an 8% bond and holding an 8% bond more than a 6% bond. You get the drift.

But eventually, we had to reach a historic low in what was almost a 40-year trend.

To show how extremely rare this low in 2020 was for bond yields, we will go way back in history.

So, what could ancient history teach us?

The following, in my opinion, is a quote from the best book ever assembled on bond yields and returns, A History of Interest Rates. My version is the third edition, revised (1996). The original, written by Sidney Homer with Salmon Brothers, came out in 1969. Homer starts his book with Mesopotamian Interest Rates between 3000-400 B.C. Yes, a very long time ago.  

“In the Sumerian period, 3000-1900 BC, the customary rate of interest for a loan of barley was 33 1/3% per annum and for a loan of silver was 20% per annum.” [pg 29]

Humor me for another moment before we leap back closer to our time.

“One-half mina of silver, the possession of Nabu-Usabsi….is owed by Nabu-sar-ahesu…Yearly upon one mina, ten shekels of silver shall accumulate (16 2/3%). Another credit has no right of disposal over it until Nabu-Usabsi gets his money, full repaid. The men he caused to appear [4 witnesses, the priest] City of Urak, month of Ululu, 11th day of the 9th year of Nebuchadnessar, King of Babylon” [pg 29]

This loan was made in 595 BC, 9 years before Nebuchadnezzar’s army conquered Judah and took Jersualem:’

“Now when Jerusalem was captured in the ninth year of Zedekiah king of Judah, in the tenth month, Nebuchadnezzar king of Babylon and all his army came to Jerusalem and laid siege to it; in the eleventh year of Zedekiah, in the fourth month, in the ninth day of the month, the city wall was breached.” [Jeremiah 39:1-2]

No zero or negative interest rates here.

Now, back to a time closer to home, American history.

Low rates before the 21st century in America

Homer has a chart of long-term American bond yields between 1798 to 1981. During this extremely long period, the lowest annual yields were 2.53%. He also states that, “In 1946, the lowest bond yields in history were reached. Prime corporate bonds averaged a yield of as low as 2.37%; one issue of long taxable government bonds sold to yield as little as 1.93%”. [bold mine]

I am taking us back through HISTORY to point out something you may have never heard or read. What we saw around the world in the last decade were THE lowest yields ever.  

Anyone understanding the HISTORY of bonds and loans spanning centuries and millennia, understands the total insanity of central banks a few years ago talking about negative interest rates and tools as though these “leaders of finance” could stop the eventual RISE in yields and DECLINE in bond values. Market trends, like life on this old planet, never go on forever.

Japan: Let’s Buy Our Way Out

If you asked anyone from any culture, “Is there such a thing as unlimited debt without consequences?”, they would say NO. If you asked them about the “unlimited debt” concept from the central banks around the world, they would probably dismiss the question and end the conversation.

In April of 2013, the Bank of Japan began buying large amounts of their own bonds as part of their “monetary easing” policy. At the time, the BOJ owned 11.5% of all Japanese government bonds. By the end of 2022, they owned just over HALF of their government’s bonds, an increase of more than 4-fold in one decade. The wizards of central banking in Japan managed to sell the idea of “negative rates” for a short period of time by telling banks and consumers to BORROW more money as a way everyone would stimulate the economy, while banks and savers HOLDING higher reserves for safety were punished. It was an experiment in changing human behavior. To tell people in debt, “Take on more debt and go spend more, we will lower your rates”, while telling those with savings and more frugal, “you will be punished for being prudent”, was a policy doomed to fail.

[It’s Official: The BOJ now owns more than half of Japan’s bonds, The Asahi Shimbun, Dec 19, ‘22]

The Bank of Japan (BOJ) ended eight years of negative interest rates and other remnants of its unorthodox policy on Tuesday, making a historic shift away from its focus on reflating growth with decades of massive monetary stimulus.

While the move was Japan’s first-interest rate hike in 17 years, it still keeps rates stuck around zero as a fragile economic recovery forces the central bank to go slow on further rises in borrowing costs, analysts say. [Bank of Japan scraps radical policy, makes first rate hike in 17 years, Reuters, March 19 ‘24]

As we can see from the chart above, the Bank of Japan is not getting bond yields to stay low, they have been rising since the trend went negative.

But, as we can see from German government bonds, they are not able to control the yields on their bonds either. Global markets are doing that.

And “The City”, the financial center of London since the Bank of England was formed in 1694, is proving their long history in central banking is not helping them as UK 10-year yields have already risen above 2008 yields.

Throughout history, the City grew as an economic powerhouse, with merchants, traders, and bankers establishing their presence. The Bank of England was founded here in 1694, solidifying the City’s role as a hub for finance. Over time, the City’s distinct governance model and commercial environment allowed it to grow into one of the most important financial centers in the world. [The City of London: A Unique Financial Hub and Historic Enclave, Faisal Khan, Oct.17 ‘24]

Conclusion: Fed Rate Seems Certain, Sept 17

With another rate cut by the Federal Reserve on September 17 almost certain, will real world borrowing costs descend?

September Rate Cut No Longer a Conclusion, Statista, Aug 19 ‘25

Powell Signals Likely Rate Cut in Jackson Hole Speech – Igniting Stock Rally, Forbes, Aug 22, ‘25

In the fall of 2024 when the Federal Reserve cut the Fed Funds Rate three times. As we can see, the yields on 10 Year US Treasuries did just the opposite.

Will the Dow climb higher towards 50,000, or will the 45,000-46,000 range give way to the downside, leaving these all-time high levels?

The one thing that history has already shown us in the last decade is that we have already seen the lowest yields in history. Bull and bear market trends are common throughout the history of all markets. Pretending that with enough market manipulation we can have an eternal stock rally and return to the lowest yields in history appears to me extremely unlikely and almost a “religious” devotion to the modern day “money making wizards”.

As I wrap up this post, I am reminded of a post in late 2018 by John Rubio who started the website, Dollar Collapse. At that time, Rubio stated in an article that all the major equity indices in the US – Dow 30, NASDAQ 100, and S&P 500 – had reached their longest bull markets on record. We are now 7 years past those records.

I found this chart on their website in an article by Graham Summers, another name with a long history in writing market commentary. “Put another way, the era of ever cheaper debt is OVER. For the first time in 45 years, it is costing the U.S. MORE to issue new debt

(or roll over old debt).[Bold text is the author’s] [The Single Most Important Chart in the World is Flashing “Danger”, Graham Summers, Sept 1, 2025]

We continue to watch…and watch closely. Be on alert my friends.

“Do not lay up for yourselves treasures on earth, where moth and rust destroy and where thieves break in and steal, but lay up for yourselves treasures in heaven, where neither moth nor rust destroys and where thieves do not break in and steal. For where your treasure is, there your heart will be also.” Matthew 6:19-21

Extra: Sept 2 – Gold and Silver break out about $3500 and $40 respectively.

When Various Monetary & Market Forces Converge

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Over the last several months I have been collecting articles as well as watching market patterns from a variety of experts. Some are newer to me than others, but all have a long history. Because I see these trends converging as we go into the 3rd quarter this year, I feel compelled to share this collection of patterns with you now. For me, these are so large that collectively, they could have a global, if not historical, impact.  

Since you are reading this, I doubt this sounds like hyperbole from what we have watched since 2020. Some trends span not only years, but decades. If we had time, we could unfold trends going back centuries, or millenniums if we wanted to learn from antiquity, but we must move on.  

The “Golden” Rule Change at the Top of Central Banking

 On July 1, 2025, the Bank of International Settlements, the global hub of all central banking, are set to make changes in what is known as Basel III, a set of capital requirements on banks globally. According to Scottsdalemint.com, these are certainly needed:

The much needed change strengthens bank capital requirements, limits leverage, and increases liquidity standards to reduce financial risk and enhance banking system stability.

Wow, and the world’s highest banking officials could not figure out that all the DEBT THEY financed and fueled between 2008 (Global Debt $173 trillion) and the end of 2024 ($318 trillion) might just create too much leverage and instability?

We learn that this huge change is set to go into effect on July 1, 2025. It warned all bankers and central bankers in 2021 that PAPER GOLD assets would not be seen on their books the same as PHYSICAL GOLD. The following is from an article on the US Gold Bureau website dated March 2021.

Previously, banks could hold gold on their balance sheets in the form of unallocated paper gold contracts without holding physical gold in tangible form. These paper contracts were considered as “good as gold” when it came to determining how much capital a bank needed to maintain on its balance sheet. Under the old rules, there was little incentive to hold physical gold, as it was only valued at 50% for reserve purposes. Basel III rules move physical gold from being considered a Tier-3 asset to being considered Tier-1, which allows physical gold in bullion form to be counted at 100% value for reserve purposes. Gold in unallocated paper contracts will no longer be considered an equal asset. For this reason, banks using paper forms of gold to help meet reserve requirements will have to convert those positions to physical metal, or risk becoming too undercapitalized to continue to function. [Bold and italic text mine]

[Source: Scottsdalemint.com/ Basel III Countdown: The Gold Crisis Banks Can’t Hide, 3/10/25]

While you may have come to believe early this spring that the gold flown into New York banks from the London Bullion Banks was from fear of future tariffs, the coming of Basel III regulations moving gold to a Tier 1 asset, combined with gold prices climbing sharply since 2023, FORCED them to eventually close out short positions in the gold FUTURES markets, thus having an immediate impact on them.

Consider these numbers from an article by Doug Casey’s International Man: The Gold Rush You Weren’t Supposed To Notice and the Next Big Monetary Reset. Every retail investor and retail advisor should examine this information and these actions by the world’s largest and most informed banks right now.

Last year, central banks purchased approximately 34 million ounces of gold, marking the third consecutive year of near-record buying….

Central banks and governments are the largest single holders of gold in the world. Together, they officially own over 1.2 billion troy ounces—out of the 6.9 billion ounces humans have mined throughout history.

Russia and China—the US’s top geopolitical rivals—have been the biggest gold buyers over the last two decades.

As we come through June 2025 and head into the 3rd quarter, I think about these words written in James Rickards 2014 book, The Death of Money: The Coming Collapse of the International Monetary System.

“Most profoundly, a new gold standard would address the three most important economic problems in the world today: the dollar’s decline, the debt overhang, and the scramble for gold.” [page 241]

Think about those 3 things: debt overhang, dollar decline, and scramble for gold. That was 11 years ago. Are these huge issues not even more impactful on our world in 2025?

In Part 2 of this 3-part series, we will look at the debt overhang and the BRICS as we move toward a term we must understand, a multipolar monetary system. The BRICS meeting in Rio de Janeiro, Brazil on July 6 and 7 may be as important to watch as the reaction to the implementation of Basel III bank changes that goes in effect on July 1st.

I know these are huge trends and issues we cannot control. However, they are influencing the world we live in and our lives. We must investigate them. We must seek to understand how they could impact us.

Back soon.

“Nothing in all creation is hidden from God’s sight. Everything is uncovered and laid bare before the eyes of Him to whom we must give account.” – Hebrews 4:13

Please “Assist” My Investments

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SustainableBy the year 2024, I am certain no one will think it odd for massive sums of debt to lead to enormously negative consequences across societies. By then, history will be replete with stories from this period. However, after living through the largest growth in global debt in a 6 year period, it seems that most either do not know, or want to consider, how much the nations of the world are depending on central banks to always be ready to pour trillions of debt on top of current levels, thus somehow keeping things “normal”.

Of course, anyone willing to look at world markets from a historical basis understands that what the world has seen since 2008, has never happened at these extremes. To believe that this level of “assistance” has brought things back to “normal”, is to defy the lessons on debt from history.

Look at the chart that opens this piece. Remember the launching of the internet in the 1990s and the explosion in tech and telecom stocks from the late ’90s? From the low in 1994 to the high in 2000, the S&P 500 – a collection of 500 of the largest companies based in America – climbed 1117 points, or 250%. During that time, the national debt grew by $1.16 trillion.

Now look at what has taken place between the 2009 low (March) and 2015 high in the S&P 500 (May). Regarding points gained, this widely used stock yardstick gained 1468 points, adding 31% more than the amount produced in the late ‘90s. However, percentage wise, it was actually 12% less than the late ‘90s run.

But all investors should be focused not on what was made in stock gains, but the skyrocketing costs of “stimulus” added to the US national debt during this period. In the recent 6 year run, the US national debt soared $7.2 trillion, compared to $1.16 trillion during the 6 year run in the late 90s, an increase of 519% over the previous bull market run!

Now THAT is a whale of a lot of “assisting”.

Without the Federal Reserve’s QE I, II, and III, to “stimulate” the markets that were suppose to then stimulate the economy, the debt levels would have never risen this fast.

 

Enjoy the Party Today; the Hangover Can Always Be Stalled… Right?

Most of 2015 we watched the Dow vacillate up and down through its 18,000 level. While the Federal Reserve’s QEIII had stopped last October, there was the belief that the the Bank of Japan and the European Central Bank could pick up the slack this year.This proved to be the case into Q2 in their markets, but the Dow and S&P 500 had been stalling around 18,000 and 2,100 respectively all year.

With major problems hitting China (Q2 ’15), the world’s front runner in increasing its own debt levels, as well as the impact of Greece on the EU, the global slowdown finally caught up with the computer algorithms two weeks ago in global financial markets.

“Kick the can” abruptly fell into a large pothole. The “riskless” market feeling that tens of millions of investors had grown accustomed to, suddenly became the “risk full” market where investors headed for exits quickly, making record redemptions.

‘Total Risk Surrender’: Record 29.5 Billion Yanked From Stock Funds, Morningstar, 8/28/15

Even now, many articles are explaining this as another computer glitch, rather than the normal pattern among human beings that understand that after “all time high” headlines, must come the bust phase, thus seek to sell rather than ride markets back to their third major bottom since 2000.

DowAugust31_2Years_Living2024

The major central banks in this global drama – the Bank of Japan, Federal Reserve, European Central Bank and People’s Bank of China – have fostered a more than 40% increase in global debt levels since 2007 as the “solution” to the 2008 debt crisis. Why would we NOT expect serious consequences across every aspect of our societies from this global financial bubble, like what we saw from the 2008 bust?

 

Thinking and Acting Outside the Box

The problem with mania markets, especially where the state supports wild speculation that can not be sustained, is that history is replete with stories of financial leaders and insiders selling out at the top.

Sadly, the “it’s only a pullback”, and the “recovery” after two 50% plus declines in the S&P 500 since 2000, has tens of millions of retail investors and advisors caught up in the myth that somehow, someway, “the stock market” will always come back to these levels and climb higher. The fact that Greenspan cut rates to 1% in 2003 to create the largest housing bubble in American history seems to be of no importance to one’s personal investment plans. The fact that Bernanke and Yellen have kept a zero interest rate policy in place since December 2008, pouring more cheap debt into the system that at anytime since the nation was founded in the 1700s, seems to be something we don’t even consider when talking about personal or business financial goals over the next 5 to 10 years.

I have often wondered why so few Americans even discuss where the nation is headed financially when discussing their own finances and plans.

Debt.US.GDP

 

Make Changes & Prepare for the Bust; Help Yourself and Others

It should also be clear for anyone concerned about their finances, that when a weekly record is made in redemptions from US equity funds only one month after the highest level on record was made in the NASDAQ, that seeking to learn what the big money has been doing recently would be prudent for the smaller and less informed investors.

Hedge Funds Gear Up For Another Big Short; Some Money Managers Are Looking To Profit From Potential Trouble At Some “Alternative” Mutual Funds and Bond ETFs, WSJ, 7/21/15

Billionaire Stanley Drunkenmiller Loads Up On Gold, Makes It His Largest Position For First Time Ever, Zero Hedge, 8/16/15

What good will it do as trillions in capital are lost again by retail investors and more conventional strategies, while capital continues concentrating in the hands of tiny fraction of the world? Is this really progress? If smaller investors are willing to change, and prepare for the bust rather than merely ride it to the bottom again, would this not be a better option for them and their community?

New Oxfam Report Says Half of Global Wealth Held by the 1%, The Guardian, 1/19/15

No, Billionaires Don’t Drive Economic Growth – and Crony Billionaires Strangle It, The Guardian, 7/15/15

With so much money getting ready to be moved from smaller investors yet again, providing less funds to be spent across our economy, I hope you will share this article with anyone willing to think outside the box. Time is quickly running out to bury our heads in the proverbial sand.

If history repeats itself once again, the uber-wealthy (0.5%) will merely protect or grow their wealth in the bust phase ahead, while tens of millions of smaller investors will watch what they have vanish, placing their hopes on yet one more rescue by the hands of central bankers. If only we could see the value of investing in lives as even more critical to our nation as investing in “assisted” markets.

Americans Not In Labor Force Exceed 93 Million for First Time; 62.7% Labor Force Participation Matches 37-Year Low, CNS News, 4/3/15

“And his master praised the unrighteous manager because he had acted shrewdly; for the sons of this age are more shrewd in relation to their own kind than the sons of light. And I say to you, make friends for yourselves by means of the wealth of unrighteousness, so that when it fails, they will receive you into the eternal dwellings.” – Luke 16:8-9

I believe in the period ahead, we will all want to know that there are others around us who would be willing to make sacrifices for us and they know the same from us.

“Greater love has no one than this, that one lay down his life for his friends” – John 15:13

  • – On August 24, 2015, the Dow dropped 1,089 points, surpassing the May 6, 2010 flash crash. Because of the extraordinary financial period we are watching, I have linked an interesting piece written by a colleague. Whether you agree or disagree with his conclusions, I believe you will find the piece fascinating when considering the unique period in financial history we are all living through. Click here to read, The Imminent Financial Reckoning, released on August 25, 2015.

A Curious Mind

 

The Unlimited Mammon Master

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Money“No one can serve two masters; for either he will hate the one and love the other, or else he will be loyal to the one and despise the other. You cannot serve God and mammon.” – Matthew 6:24 , NKJV

To The World of 2024,

In 2010, I wrote a public article titled, John’s Economic Worldview. In the opening pages, I discussed what is known as one’s worldview. Every individual has one, whether they can describe it or not.

The following are four traits of one’s worldview, as presented by Belgium philosopher, Leo Apostel:

1. A futurology – “Where are we headed?”
2. Values and ethics – “What should we do?”
3. A methodology – “How shall we attain our goals?”
4. A theory of knowledge – “What is true and false?”

Since 2010, I have watched with frustration and yet fascination, at how much “faith” most Americans place in our money, a substance that all major nations have been creating through the expansion of their debt loads since the US removed the dollar from the gold exchange standard in 1971. Most individuals have little or no understanding of the history of money, or the fact that the more money is created, the larger the debt load and the greater the drag on the entire economy long term.

Thus, the question, “Where are we headed?”, is most often based on one’s personal experience, rather than a close examination of the history of money.

Since the historical data is the same for every person, and modern money is created by the expansion of debt, let’s take a quick look at the question “How shall we attain our goals?”, and how this has worked since WWII.

Getting Rich Quickly By Rapidly Going into Debt

When my father returned from WWII in 1945, the US national debt stood at $250 billion. It would continue to rise, reaching $394 billion in 1971. During this 26 year period, the United States would exchange its gold for any nation desiring to exchange their U.S. dollars for our gold.

However, as of August 1971, this option was closed to every nation worldwide, and the world’s major industrial powers were no longer willing to exchange their paper money for the gold they were holding. This had NEVER happened in history prior to 1971.

From that point on, it was paper debt based money for paper debt based money, controlled at the highest levels by the most powerful central banks in the world.

Between 1971 and 2000 – the top of the first stock/debt bubble – the US national debt grew by $5,206 billion (1,321%) to reach $5,600 billion.

Remember, under the gold exchange standard between 1945 and 1971 (26 years), the US national debt only grew by $144 billion or 57%. Once the gold exchange standard was removed, the US national debt exploded $5,206 billion (1,321%) in 29 years!

Now what individual or corporate leader would say that growing their debt by 51% is WORSE than growing it by 1,321%? Yet as a society all of this new debt had to go some place, and thus became the fuel to inflate prices everywhere.

For those who had wealth, the new debt became the most powerful source for growing that wealth. How could devaluing our money be bad? For those who did not have wealth, or whose lives were impacted by loss of capital and/or job, the rise in prices caused by this new debt which was devaluing their money moved them more and more down the economic food chain.

Record 93,175,000 Americans Not In the Labor Force, Breitbart, April 3 ’15

The answer to the question, “Where are we headed?” should have seemed obvious in 2000. It should be even more so in 2015, when the US national debt has more than tripled from 5.6 trillion in 2000 to 18.1 trillion today.

However, it wasn’t then, and isn’t today. While most individuals would never encourage an individual or company to rapidly grow their debts in order to become richer, our “faith” in unlimited national debt as the basis for unlimited money boggles the mind.

Once again, our main barometer seems to return to our own personal experience, versus the financial history of the entire nation.

 
Two Bubbles Popped; Waiting for Third One

StockWealth.DebtLevels_May2015

As more and more debt can give an individual an image of wealth, without examining the growing debt levels, one is never looking at the entire picture. The same for a nation.

The chart above uses two metrics; the stock wealth, based on the value of the market capital of the Wilshire 5,000 at any given time – the broadest measure of publicly traded US stock wealth, and the national debt of the United States.

While an individual or group of individuals can say that they are wealthier today than in 2000, comparing the wealth/debt ratio based on these two variables, we find that the stock to debt ratios are substantially lower today than they were 15 years ago in 2000.

By asking the question, “ How do we attain our goals?”, we must differentiate between short term and long-term views. Twice since 2000, US stock bubbles have burst, completely wiping out wealth that took years to build. NEVER since 2000 has the amount of debt carried by the nation gone down. ALWAYS, the solution for a market decline was cut interest rates and print up more money (i.e. debt) to kick start the “recovery”. With 2015 being the seventh year of a zero interest rate policy by the Federal Reserve, cutting rates is out of the question for future slowdowns.

NASDAQ_Stocks.Debt.2000

SP500_2007top

Andrew Carnegie and Jesus

In 2003, a friend suggested I read the book, The Call: Finding and Fulfilling The Central Purpose of Your Life (1998), by Os Guinness. Guinness challenges his readers through the lens of two lives in the chapter, More, More, Faster, Faster.

The first is Andrew Carnegie, one of the wealthiest men in American history.

Andrew Carnegie wrote this famous memorandum in 1868, when he was thirty-three and stuffed it away in a drawer: ‘Man must have an idol – the amassing of wealth is one of the worst species of idolatry – no idol is more debasing than the idol of money.’
But in 1905, President Theodore Roosevelt wrote reluctantly of Carnegie himself, ‘I tried hard to like Carnegie, but it was pretty difficult. There is no type of man for whom I feel a more contemptuous abhorrence than for one who makes a God of mere money- making.’

The second was a closer examination of the words Jesus presented in the Sermon on the Mount, specifically Matthew 6:24, as stated at the opening of this post:

“Jesus’ use of Mammon (Aramaic for wealth) is unique – he gave it a strength and precision that the word never had before. He did not usually personify things, let alone deify them. And neither the Jews nor the nearby pagans knew a god by this name. But what Jesus says in speaking of Mammon is that money is a power – and not in a vague sense, as in the “force” of words. Rather, money is a power in the sense that it is an active agent with decisive spiritual power and is never neutral. It is a power before we use it, not simply as we use it or whether we use it well or badly.
As such, Mammon is a genuine rival to God.”

In 1906, Frederic Clemson Howe published his short work, The Confessions of a Monopolist. Howe, more than a century ago, could see the power of money, a power that could certainly rise to god like status over men and women.

“Long before my election to the Senate I learned two things pretty thoroughly. One was, if you want to get rich – that is, very rich – in this world make Society work for you. Not a handful of men, not even such an army as the Steel Trust employs, but Society itself. The other thing was, that this can only be done by making a business of politics. The two things run together and cannot be separated. You cannot get very rich any other way.”

It would appear that we have created the tools, where the idea of “unlimited debt based money” coupled with computers trading at the speed of light, have truly given individuals the sense that they have attained god-like status, and Mammon has provided a sense of power like nothing else. Yet that concentration of power, has already proven to be a huge negative at the societal level…. and we are still today watching financial markets recording “highest in history” price levels!

 

The Results of Unlimited Mammon

 
Virtu’s Second Attempt At Going Public Reveals Why FX Trading Is Now Impossible, Zero Hedge, April 6, ’15

“As Virtu Financial (a high frequency computer trading firm) stated (shortly before its IPO went public April 2015), ‘The overall breadth and diversity of our market making activities, together with our real-time risk management strategy and technology, have enabled us to have only one overall losing day during 1,485 trading days.’
As we reported back in February, ‘not only did Virtu not have a trading day loss in all of 2014, but on its “worst” trading day, the firm made “only” $800,000 to $1,000,000.’”

5 Big Banks Pay $5.4 Billion for Rigging Currencies, CNN Money, May 20 ’15

“U.S. regulators hit five global banks with $5.4 billion in penalties Wednesday for trying to rig foreign currency markets in their favor.
Citigroup (C), Barclays (BCS), JP Morgan Chase (JPM), and Royal Bank of Scotland (RBSPF) were fined more than $2.5 billion by the U.S. after pleading guilty to conspiring to manipulate the price of dollars and euros…
The first four banks operated what they described as ‘The Cartel’ from as early as 2007, using online chatrooms and coded language to influence the twice-daily setting of benchmarks in an effort to increase their profits.”

Is it possible that Mammon has become the number one god we turn to daily, and if so, could there be severe consequences at the global level in the years ahead from placing so much trust in wealth that depends on ever larger amounts of debt?

Richest 1% To Own More Than Rest of World, Oxfam Says, BBC News, Jan 19 ‘15

 
Goldman Sachs Warns “Too Much Debt” Threatens World Economy, Zero Hedge, May 29, ’15

 
Keynes“Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate secretly and unobserved, an important part of the wealth of their citizens….As inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and lottery.” The Economic Consequences of Peace (1919) John Maynard Keynes, pg 233]

“I think, increasingly, they (central bankers) are discomforted. More than anything else I think it’s not just the ex central bankers but increasingly the people that are still holding the levers. They are starting to ask whether they have somehow been backed into a place where they don’t really want to be. Now, I agree with you, Sean, that there’s an element in everybody, although some more than others, where they’re glad to be looked upon as the saviours of the day. But I rather sense that an increasingly large number of central banks are actually looking at what is going on and saying ‘We are being asked to do something that is effectively impossible.'” [William White, former economic advisor to the Bank of International Settlements, in an interview with Sean Corrigan, Chief Strategiest for UK based Hinde Capital, The Road To Nowhere, An Interview with William White, Page 1, The Hindesight Letters, March 2015, pg 5]

 

“You shall have no other gods before Me.” Exodus 20:3

I wonder how individuals and societies will change their views toward debt based money by 2024?

 

A Curious Mind,

Why The Dam Can Not Break

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To the world of 2024,

Today I am writing you as the year 2014 is coming to an end. I have been writing my thoughts publicly and privately for the past decade. It has been incredible to have had discussions with people around the world, brought together by a public writing. I have looked at the world through the lens of history, science, and crowd and individual behavior in regards to money and financial markets.

When the world of 2024 reads these comments, I believe we will ask the simple question, “How had entire societies come to the conclusion that doing things totally opposite at the system level than espoused at the individual level, would continue to lead to more ‘prosperity’, or at least return things to ‘normal'”?

Mises_CA_PrintingMoney Let me give you an idea that today is almost taboo and not open to public discussion in the world of money. If I were to tell you to pay down your debts, start living within your means, and saving for the future, this idea would be accepted across cultures around the world. Yet, as the greatest explosion of debt in human history has occurred in the last 6 years, we seem unwilling to consider how this could possibly have a massively negative impact on ALL of our lives in the future.

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As individuals, we espouse one set of ideas regarding debt; as societies, we accept a totally opposite set of ideas. On the individual level, we have experienced limits to debt. On a societal level, for the last few decades the idea of “unlimited debt” has been commonly accepted as the means to correct the latest financial or economic crisis.

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I am certain by 2024 this will seem very odd. In fact, it will seem complete madness that entire societies could have accepted the idea of “unlimited debt” as the solution to bringing about “stability” and this being the main idea presented as necessary in order to return our lives to “normal”.  However, you must remember that this idea has been the most widely taught idea in economics and finance, embraced by political leaders, and experienced by the public since 1971. Many people know that in 1971, the United States removed it currency, the US dollar, from being backed by gold. Said another way, we were no longer willing to exchange our paper dollars for the gold we held at the national level if another country grew fearful of our spending and debt levels and wanted gold which can not change, versus the promise to pay with even more debt backed paper (now electronic) dollars. This event opened a period in history that no one had ever seen before, and the concept of “unlimited debt”.

Consider these comments from August 15, 1971: A Date Which Has Lived In Infamy in Forbes on  August 14, 2011:

In their impossibly good book Money, Markets, and Sovereignty (2009), Benn Steil and Manuel Hinds make the point that over the last four thousand years, the only period in which humanity has not consistently based its currency in metal, specifically gold, is the last forty.

More on this in the future. For now we return to perception, which is more powerful than reality.

In 2006, I read Dr. Jared Diamond’s book, Collapse: How Societies Choose to Fail or Succeed. Ten years earlier, I would have never read such a book. The stereotype of “that’s just doom and gloom stuff ” would have stopped me. Yet, between 2000 and 2002, my personal and professional life saw enough pain from the collapse of trillions in wealth, that it lead me to seek answers from many sources, whether economic theories or studies on human behavior in crowds. Studying history was always the common theme of these discussions, as it still is today.

Consider this idea from Diamond’s book, which focuses on the environment, not finance. I believe it will help the world of 2024 to better understand the world of 2014.

The final speculative reason that I shall mention for irrational failure to try to solve a perceived problem is psychological denial. …If something that you perceive arouses in you a painful emotion, you may subconsciously suppress or deny your perception in order to avoid the unbearable pain, even though the practical results of ignoring your perception may prove ultimately disastrous.

Then Diamond uses an illustration I have used many times in the last 8 years.

Consider a narrow river valley below a high dam, such that if the dam burst, the resulting flood of water would drown people for a considerably distance downstream. When attitute pollsters ask people downstream of the dam how concerned they are about the dam’s bursting, it’s not surprising that fear of a dam burst is lowest far downstream, and increases among residents increasingly close to the dam. Surprisingly, though, after you get to just a few miles below the dam, where fear of the dam’s breaking is found to be highest, the concern then falls off to zero as you approach the dam. That is, the people living immediately under the dam, the ones most certain to be drowned in a dam burst, profess unconcern. That’s because of psychological denial: the only way of preserving one’s sanity while looking up every day at the dam is to deny the possibility that it could burst.

This seems to be the easiest way, to understand why we have one view of debt for our personal lives, and yet a totally opposing view at the societal and system level.

We have experienced two financial “dam breaks” since the year 2000 in world markets. It has impacted hundreds of millions of lives around the world. Yet, after both breaks, the consensus belief continues even today that, “unlimited debt will bring things back to normal”.

As I write more, I will share with you why I grow more confident that the world of 2024 will be much brighter and different from the world of 2014. I am not merely thinking solely about money, but about our way of life across the globe.

I know, after this post, this may sound like a person in denial. However, after reading so many stories about the pain that has come to people all over the world since the idea of “unlimited debt” began in the 1970s, I have found incredible hope in the writings the Jewish race in ancient history left our modern world today.

Sincerely,

A Curious Mind