Monday, January 19, 2015

Understanding the Bond Bubble

This is similar to the 1987 Crash that took place in equities. The 1987 Crash was currency driven set in motion by another BRAIN-DEAD idea of forming the G5 in 1985 to manipulate the dollar lower. It was the Plaza Accord that forced structural changes in Japan known as “reforms” all designed to lower the US Trade Deficit that was not even real. The lawyers in charge looked at the current account and did not understand the more Japanese invested in US government bonds, the inflow appeared in the capital account while the interest payments flowed out of the current account these fools assumed was trade.
 The stock market crashed because foreigners perceived the dollar would decline by 40% and sold dollar assets. We are looking at this phenomenon in Euroland. The spread between German 10 year and US 10 Year Treasuries may prove to be the trade of the century later in the year (short Germany Long US). German rates .45% v 1.84%.

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