Unprecedented Global Bond Bubble Threatens Holders of Cash
As big as previous real estate and stock market bubbles have been, the current global bubble in government debt dwarfs them all. Not only is it far bigger in size and scope (some $60 trillion in sovereign bonds now trade globally), it is also unprecedented in character.
The world has rarely seen a bond bull market that is not only 36 years old, but also shows few signs of ending. Never before in recorded history have interest rates been so low across the board.
How much lower can interest rates go? Conventional wisdom once held that rates could only get as low as 0%. In the current crazed central banking climate, yields on cash can move below zero, and they could stay there for longer than anyone can possibly imagine.
Negative rates – where lenders pay interest to borrowers – are a strange-but-true phenomenon in Japan and throughout much of Europe. They aren’t confined just to overnight rates set directly by central banks. They have spread across the yield curve to afflict the long-term bond market as well.
Gleason discusses: the Fed speaking about imposing negative rates in the US; there is still an escape hatch to sound money; and don’t bet against the government bond market.