Why A Bear Market In Bonds Points To A Weakening Economy

Cartoon, “Wall Street bubbles – Always the same”. American financier J. P. Morgan is depicted as a bull, blowing soap bubbles for eager investors. (See Bull market). Several of the bubbles are labeled, “Inflated values.” Seen behind Morgan is a stock ticker, a machine which provided current information on stock prices, 1901

After closing at 0.53 percent in July 2020 the yield on the ten-year US T-bond moved relentlessly higher, closing on Tuesday, September 28, 2021, at 1.55 percent. There is a growing likelihood that the July 2020 figure of 0.53 percent might have been the lowest point.

10-year T-bond yields

How should we view this in the context of historical trends in bond yields?

First, it is important to consider the behavioral foundations of bond buying.

As a rule, people assign a higher valuation to present goods versus future goods. This means that present goods are valued at a premium to future goods. This stems from the fact that a lender or investor gives up some benefits at present. Hence, the essence of the phenomenon of interest is the cost that a lender or an investor endures.

An individual who has just enough resources to keep him alive is unlikely to lend or invest his paltry means. The cost of lending or investing to him is likely to be very high—it might even cost him his life if he were to consider lending part of his means. Therefore, he is unlikely to lend or invest even if offered a very high interest rate. Once his wealth starts to expand, the cost of lending or investing starts to diminish. Allocating some of his wealth toward lending or investment is going to undermine to a lesser extent our individual’s life and well-being at present.

From this we can infer, all other things being equal, that anything that leads to an expansion in the wealth of individuals gives rise to a decline in the interest rate, i.e., the lowering of the premium of present goods over future goods. Conversely, factors that undermine wealth expansion lead to a higher interest rate. Observe that while the increase in the pool of wealth is likely to be associated with a lowering in the interest rate, the converse is likely to take place with a decline in the pool of wealth.

People are likely to be less eager to increase their demand for various assets, thus raising their demand for money relative to the previous situation. All other things being equal, this will manifest in the lowering of the demand for assets, thus lowering their prices and raising their yields.

Note again, that increases in wealth tend to lower individuals’ time preferences whereas decreases in wealth tend to raise time preferences. The link between changes in wealth and changes in time preferences is not automatic, however. Every individual decides how to allocate his wealth in accordance with his priorities.

Changes in Money Supply and Interest Rate

An increase in the supply of money, all other things being equal, means that those individuals whose money stock has increased are now much wealthier than before the increase in the money supply took place. Hence, this will likely give rise to a greater willingness in these individuals to purchase various assets. This leads to the lowering of the demand for money by these individuals, which in turn bids the prices of assets higher and lowers their yields.

At the same time, the increase in the money supply sets in motion an exchange of nothing for something, which amounts to the diversion of wealth from wealth generators to non–wealth generators. The consequent weakening in the wealth formation process sets in motion a general rise in interest rates. This implies that an increase in the growth rate of money supply, all other things being equal, sets in motion only a temporary fall in interest rates. This decline in interest rates cannot be sustainable because of the damage to the process of wealth generation.

Conversely, a decline in the growth rate of money supply, all other things being equal, sets in motion a temporary increase in interest rates. Over time, the fall in the money supply encourages a strengthening of the wealth formation process, which sets in motion a general fall in interest rates. We can thus see that the key to the determination of interest rates is individuals’ time preferences, which are manifested in the interaction of supply and demand for money. Also note that in this way of thinking the central bank has nothing to do with the determination of the underlying interest rates. The policies of the central bank only distort where interest rates should be in accordance with time preferences, thereby making it much harder for businesses to ascertain what is really going on.

Assessing Historical Long-Term Yield Trends

From 1960 to 1979 the yields on the long-term US Treasury bond had been following a visible uptrend (see chart). From 1980 until now, the yields were following a downtrend (see chart).

10-year T-bond yields vs trend
10-year T-bond yields vs trend

From 1960 to 1979 we can also observe that the yearly growth rate of money supply (AMS) followed a visible uptrend (see chart). This caused a strong weakening in the wealth generation process on account of the exchange of nothing for something. The weakening of the process of wealth generation due to the uptrend in the growth momentum of money supply lifted individuals’ time preferences, and this placed the underlying long-term yields on a rising trend.

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Millions of Americans will suffer amid mass power outages this winter, thanks to a burgeoning energy crisis, insider warns

Last winter, power outages that struck Texas and other parts of the country at peak coldness endangered the lives of millions, but were, thankfully, short-lived.

However, this coming winter, things could be a lot different — as in, power outages and blackouts could get much worse thanks to a looming energy crisis, according to an insider.

Already, there is an energy shortage that is wafting through Asia and Europe, but according to Ernie Thrasher, CEO of Xcoal Energy & Resources LLC., it could also hit the U.S. this winter when Americans are at their most vulnerable.

“We’ve actually had discussions with power utilities who are concerned that they simply will have to implement blackouts this winter,” Thrasher warned in an interview with energy research firm IHS Markit.

That’s because U.S. energy producers are going to have to quickly pivot to more coal because natural gas prices are soaring in the Biden economy’s war on fossil fuels.

“They don’t see where the fuel is coming from to meet demand,” he continued, adding that 23 percent of utilities are moving away from gas this fall and winter so they can burn more coal.

If there is any good news in this assessment, it’s this: These soaring fossil fuel prices mean that the transition to so-called ‘renewable’ green energy will take decades, not years, because the technology is unreliable and it’s not going to improve because the sun only shines when there are no clouds and wind turbines only turn when there is wind. Plus, the existing infrastructure in the United States for green energy production is lacking (because, believe it or not, green energy production is more expensive than fossil fuels, and even they are rising in price, thanks to Biden’s policies).

But here’s the thing as well: Europe and Asia have shifted tons of resources into green energy production and because they have, they are suffering energy shortages worse than the United States because again, green power is unreliable. And as winter approaches, energy producers on their continents are also seeking out coal, though there won’t be enough to go around because coal production has taken a hit already since Donald Trump was forced out of office.

“Those who predicted last year the demise of oil, gas, and coal after the pandemic and those who said that peak oil demand was already behind us because lasting changes in consumer behavior would reduce the use of crude are now facing reality,” wrote Tsvetana Paraskova for OilPrice.com last week. “Global oil demand is just a few months away from reaching pre-pandemic levels, while natural gas and coal demand have already exceeded the 2019 volumes.”

“…[F]ossil fuels continue to supply most of that energy and will do so for years to come. Last year’s slump in fossil fuel consumption is being erased, and those who expected oil, gas, and coal demand to never return to pre-COVID levels now know they were wrong,” she wrote, adding: “Economies are recovering post-COVID, and consumer habits haven’t changed all that much: consumers still want a warm home, power, the latest tech gadgets, and to be able to freely travel and spend money.”

But even switching to fossil fuels this winter may not be enough to stave off power outages. That’s because the number of coal miners has been shrinking and now stands at its lowest number in decades. After collapsing from a high of 180,000 to 42,500 in August, the industry is now 9,500 miners short from pre-COVID times.

“That’s making it difficult for mining companies to boost production at a time when the global energy crisis is making utilities desperate for every lump of coal they can dig up. Even with coal prices surging around the world, the labor shortages are another sign that it’s going to be tough to shore up energy stockpiles,” Bloomberg reported.

“That whole supply chain is stretched beyond its limits,” Thrasher added. “It’s going to be a challenging winter for us here in the United States.”

The green energy ‘plan’ envisioned by liberals won’t power our ultra-modern country, period. We’re about to find that out the hard way.

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‘System collapse’: Supply chain workers warn of impending breakdown because COVID shutdowns have drained the workforce and worsened product shortages

Workers who make the global supply chain function are warning that it is extremely close to falling apart because of a combination of lingering COVID pandemic shutdowns and shortages of workers and staff along the way.

“Several industry groups have warned world leaders of a worldwide supply-chain ‘system collapse” due to pandemic restrictions, coming as Federal Reserve Chairman Jerome Powell suggested that the current period of higher inflation will last until 2022,” The Epoch Times reported, as prices for oil continue to rise and have surpassed $80 a barrel as of this writing for the first time since earlier in the Trump administration.

The outlet continued:

The International Chamber of Shipping, a coalition of truck drivers, seafarers, and airline workers, has warned in a letter to heads of state attending the United Nations General Assembly that governments need to restore freedom of movement to transportation workers amid persistent COVID-19 restrictions and quarantines.

The group noted further that if improvements are not made and soon, there will be a “global transport system collapse,” adding that “global supply chains are beginning to buckle as two years’ worth of strain on transport workers take their toll,” according to the letter.

The International Air Transport Association (IATA), the International Road Transport Union (IRU) and the International Transport Workers’ Federation (ITF), representing about 65 million transportation workers the world over, signed the letter.

“All transport sectors are also seeing a shortage of workers, and expect more to leave as a result of the poor treatment millions have faced during the pandemic, putting the supply chain under greater threat,” the letter said.

“We also ask that WHO and the ILO raise this at the U.N. General Assembly and call on heads of government to take meaningful and swift action to resolve this crisis now,” they wrote.

“We are witnessing unprecedented disruptions and global delays and shortages on essential goods including electronics, food, fuel and medical supplies,” said the letter.

“The impact of nearly two years’ worth of strain, placed particularly upon maritime and road transport workers, but also impacting air crews, is now being seen,” the letter continued. ‘Their continued mistreatment is adding pressure on an already crumbling global supply chain.

“At the peak of the crew change crisis 400,000 seafarers were unable to leave their ships, with some seafarers working for as long as 18 months over their initial contracts,” it added. “Flights have been restricted and aviation workers have faced the inconsistency of border, travel, restrictions, and vaccine restrictions/requirements.

“Additional and systemic stopping at road borders has meant truck drivers have been forced to wait, sometimes weeks, before being able to complete their journeys and return home,” the union bosses noted further, calling on governments to prioritize vaccines for transportation workers and grant them more freedom of movement.

One problem — the cargo ship backlog — stems from another — the shortage of dockworkers and truck drivers.

“As long as cargo doesn’t move off terminals, it does impede the amount that can come off the ship,” Bethann Rooney, deputy port director of Port of New York and New Jersey, told the Journal of Commerce. “Since terminals are at or near capacity, they can’t turn over the ship as quickly because there’s no room at the inn.”

Some retailers like Costco have resorted to retaining their own cargo ships on routes from Asia to the Western Hemisphere and the U.S., according to The Epoch Times. But it’s still not enough and there will no doubt be shortages of products on shelves ahead of Thanksgiving and Christmas.

“Many shoppers across the United States and the rest of the world have noticed shortages of everyday products in recent weeks, with Costco recently limiting the amount of toilet paper and cleaning products its customers can buy amid the supply crunch,” the Daily Mail reported. “Plastic products are also becoming scarce. Production of a wide range of electronic devices and cars has slowed down because of microchip shortages.”

Consumer experts are advising people to order early.

“We’re witnessing a pandemic-induced buying surge by the American consumer, the likes of which we’ve never seen,” Gene Seroka, executive director of the Port of Los Angeles, told ABC News this week.

“Managing through that process over the next couple of years is … going to be very challenging because we have this hypothesis that inflation is going to be transitory. We think that’s right,” Federal Reserve Chairman Jerome Powell said. “But we are concerned about underlying inflation expectations remaining stable, as they have so far.”

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EXCLUSIVE: COVID relief funds distributed to cities and states require full compliance with Biden vax mandates; counties can use money to bankrupt and REPLACE local businesses

As part of the American Rescue Plan Act of 2021, so-called “Coronavirus State Fiscal Recovery Funds” are distributed to states which then deposit those funds into the bank accounts of counties and cities.

Those counties and cities, in turn, are using the federal money to award contracts to local contractors. Those contractors have employees and can hire subcontractors who have their own employees.

All through this chain — Federal money, state money, city money, county money, contractor money, payroll money — the money comes with a mandatory vaccine requirement or the funds have to be repaid.

This is because the American Rescue Plan of 2021 is administered by the US Treasury. In its terms and conditions document covering federal grant awards, the US Treasury explicitly states that award recipients (and those who receive those funds as they are distributed) must comply with Joe Biden’s “executive orders.”

9. Compliance with Applicable Law and Regulations.
a. Recipient agrees to comply with the requirements of section 603 of the Act, regulations adopted by Treasury pursuant to section 603(f) of the Act, and guidance issued by Treasury regarding the foregoing. Recipient also agrees to comply with all other applicable federal statutes, regulations, and executive orders, and Recipient shall provide for such compliance by other parties in any agreements it enters into with other parties relating to this award.

This means that all recipients of covid “relief” funds under the Biden regime are compelled to push vaccine mandates, even to their contractors and subcontractors (and all their employees).

Federal relief funds can be used by counties and cities to replace thriving local businesses where vaccines are mandated

Even more alarming is the fact that these federal covid “relief” funds can be used by local cities and counties to replace private sector businesses which are not demanding 100% vaccine compliance.

For example, a local city or county in any U.S. state may decide to use federal funds to launch:

  • A local ISP / telecommunications service, putting local ISPs out of business.
  • A local ambulance service, putting private ambulance providers out of business.
  • A local medical ER service, putting private ERs out of business.

… you get the picture. Essentially, counties and cities can use federal funds to displace private sector businesses, driving a kind of communist takeover of local economies where vaccine mandate compliance is necessary for anyone to keep their job. These federal funds can also be used by local governments to purchase buildings and land, taking them off the market and denying their use by private sectors businesses.

Since the Federal Reserve continues to print a seemingly unlimited quantity of fake fiat currency (dollars), this communist takeover of local economies will not stop until the money printing machines cease operations and the dollar collapses. At that point, these local communities that depended on federal money will be plunged into panic, destitution and chaos because they no longer have organic, private sector, free market businesses that are owned and operated by local people.

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9/20/21-9/26/21 Weekly Reports: The Truth Of Economy In China

1.HNA’s Chen Feng and Tan Xiangdong Suspected of Criminal Offenses, Taken Compulsory Measures

HNA Group announced on September 24 that the public security authorities of Hainan Province notified Chen Feng, chairman of the group, and Tan Xiangdong, chief executive officer, that they “have been taken into compulsory measures by the law due to suspected criminal offenses.” Gu Gang, head of the joint working group of HNA Group of Hainan Province and secretary of the party committee, met in the evening of the 24th to emphasize that the bankruptcy restructuring work has entered the final stage of the sprint, “all units should reflect deeply on the painful lessons of HNA’s 28 years of development, to deeply understand that the rebirth of HNA is the opportunity given by the party and the state, to feel the party’s grace, listen to the party’s words, follow the party. “

Due to the inability to pay off its debts, HNA Group declared bankruptcy in January this year. On March 13, the Hainan Provincial High Court ruled to substantially merge and reorganize 321 companies, including HNA, after registering claims exposed the insolvency of nearly four hundred billion yuan. On September 18, Gu Gang announced that after the reorganization, HNA would be split into aviation, airport, finance, commercial and other segments, led by a new shareholder of the beneficial owner and that the old shareholder team and the CNA Foundation’s interests in HNA Group and its member companies would all be zeroed out. In addition, founder Chen Feng’s equity is also being zeroed out.

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With the collapse of its economy, CCP will expand its biochemical warfare and continue to release new viruses

Translated by: MOS Finance Team – Xia

With the Chinese Communist Party (CCP)’s economy collapsing, the Chinese people will uprise, and Communist China will soon be decoupled from the world economy. This series of aftermath indicates that CCP is doomed to be finished on the global stage. By that time, CCP will continue releasing the new virus, moreover, the covid vaccines will not be effective at all.

The new virus is called “Fever Virus” (literal translation). After people are infected, their mouths, noses, eyes, and ears will bleed immediately and will probably die. The new virus is extremely toxic and doesn’t have a long incubation period. The mortality rate will be particularly high as well. Now, CCP is working with a certain country to build 2-3 new biochemical weapons laboratories. After releasing the new virus, CCP will shift the blame to the COVID.

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‘Transaction denied’: Get ready for credit card that cuts off spending once you hit your CO2 max

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(LifeSiteNews) — The company that created a credit card to track your purchases’ CO2 emissions is set to launch a “premium” version of the card that cuts off your spending as soon as you hit your “carbon max.”

This is the latest of many schemes to force major changes in human behaviour to allegedly lessen global warming. Social scientist and author Steven Mosher has called the global warming movement a “giant propaganda effort” and “the biggest scientific fraud ever perpetrated on the family of man.”

Doconomy has partnered with Mastercard and the United Nations Framework Convention on Climate Change (UNFCCC) to create technology for the everyday consumer that “connects the purchase price of a product with the effect on the planet measured in Kg CO2, and then recommends the amount to offset – practically putting a price on carbon,” as the Doconomy website explains.

The DO credit card works hand-in-hand with a phone app, launched in April 2019, that quantifies the CO₂ emissions generated from each credit card transaction. The website introduces the card with video footage of whitewashed, typical consumer goods floating, like trash, as if through space, each labeled with a carbon emissions number.

The back of the card reads underneath the signature authorization area, “I’m taking responsibility for every transaction I make to help protect our planet.”

Doconomy will soon release a “premium” version of the credit card, called DO Black, touting it as “the first credit card ever to stop you from overspending.”

Measured against the UN goal of cutting carbon emissions in half by 2030, DO Black “comes with a monthly tCO2e limit, ensuring that we stick to the UN-2030-recommended cuts in carbon,” the website reads. 

“Instead of introducing a premium credit card with benefits that typically encourages further consumption, Do Black only has one essential feature – a carbon limit. The core purpose is the ability, not only to measure the impact of your consumption, but also to bring it to a direct halt,” the company stated.

The website currently features a sneak peek of the message the card user will be met with as soon as they hit their carbon max, complete with a red exclamation point warning: “Transaction denied! Carbon limit reached.”

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The illusion of getting rich while producing nothing – (excellent commentary by Charles Hugh Smith)

(Natural NewsBy incentivizing speculation and corruption, reducing the rewards for productive work and sucking wages dry with inflation, America has greased the skids to collapse.

(Article republished from CharlesHughSmith.Blogspot.com)

Of all the mass delusions running rampant in the culture, none is more spectacularly delusional than the conviction that we can all get fabulously rich from speculation while producing nothing. The key characteristic of speculation is that it produces nothing: it doesn’t generate any new goods or services, boost productivity or increase the functionality of real-world essentials.

Like all mass delusions, the greater the disconnect from reality, the greater the appeal. Mass delusions gain their escape velocity by leaving any ties to real-world limitations behind, and by igniting the most powerful booster to human euphoric confidence known, greed.

Lost in the mania of easy wealth from speculative trading is the absence of any value creation in the rotation-churn of moving bets from one table to the latest hot game: in flipping houses sight unseen, no functionality was added to the house. In transferring bets on one cryptocurrency to another or from one meme stock to another, no value to the economy or society was created.

In the mass delusion that near-infinite wealth can be generated without producing anything, creating value has no value: the delusion is that I can get rich producing nothing but speculative gains, and then I can buy all the stuff somebody else is making.

The fantasy powering the speculative frenzy is once I get rich, I’ll stop working and live off my wealth. It’s interesting, isn’t it, how everyone can get rich via unproductive speculation, quit their jobs and then live off the productive work of somebody else who failed to get rich off speculation.

Maybe that’s why all the container ships are lined up at Long Beach, waiting to unload the goodies made in China for American speculators to buy. This is what happens when the incentive structure of the economy decays so that being productive has little upside (i.e., working is for chumps) while speculating is all upside (get rich quickly and easily).

Everyone knows great empires became great by transferring their critical supply chains to competing nations, living it up on borrowed/printed money, exploiting the highest bidder wins regulatory/governance system and incentivizing speculation while pushing wage earners into debt-and-tax servitude. Bone up on your history, Bucko; all great nations got there by quitting boring, tiresome productive work to speculate on illusions of value with borrowed money.

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