Wednesday, January 14, 2009

Ambrose catching up

It would appear that Ambrose Evans-Pritchard has been sneakily listening to a pre-Christmas Peter Schiff podcast, in which Der SchiffMeister predicted a sovereign bond bubble collapse:

=> The bond bubble is an accident waiting to happen

Peter Schiff debates this in several of his pre-Christmas blogs, if you want to listen to them, but here's the crux of it:

=> The major Asian economies will continue to buy US Treasuries (and UK Gilts) for some time, escaping from the fear of stock price crashes

=> The Fed will also continue buying US Treasuries, with money out of thin air, as will the Bank of England with UK Gilts

=> Traders will continue buying US Treasuries (and Gilts), so they can flip them to the Fed (and the Bank of England) when they think the bubble is about to burst

=> The bond bubble will burst

=> What will cause the burst? Who knows. The best guess will be a smaller Asian nation (eg. Thailand, Korea, heck Vietnam!) selling out sovereign bonds at the top of the market, to flip a profit

=> At that point all of the traders will also flip their sovvies to make a huge profit

> At this point, China will finally be forced to also flip its sovvies, to prevent the situation of holding nearly $2 trillion dollars worth of firelighters

=> Just like Wile E. Coyote, US and UK sovvie bonds will miraculously stay floating in mid-air for a short while, due to 'mystery' buyers soaking them up - ie. The Fed and the Bank of England, who will continue buying bonds with money out of thin air

=> The dollar (and probably the pound, its closest sibling currency) will then Utterly collapse, with the dollar catching the worst of it, once economic reality intrudes and everyone realises that the dollar (and the pound) are literally not worth the paper they are printed on

=> It gets better - at this point, there will be no more bailouts, because all of the bailouts are being funded by sovereign bond sales

=> With no income, the US and UK governments will Really start running the printing presses

=> Then we're all screwed - unless our investment wealth is tied up in gold, silver, commodities, and other hard liquid assets (such as the shares of commodity-producing companies most isolated from the dollar and the pound - eg. Australian gold mining companies)

=> Robert Mugabe will then start Really laughing at Gordon Brown, who engineered this entire British crisis, through his policies of social engineering funded through credit expansion

=> Thanks, Gordon

=> We will then stand at a crossroads, where the government will want to choose national socialism to entrench its power - whether we let them will then be up to us

=> I rather fear that our state-educated masses will cling to Nursie, as they have been taught to do their entire lives by the state education system and the state-licensed media

But at least Ambrose E-P, while still quoting the appalling Keynes, is starting to catch up with what's really going on, so let's not begrudge him that.

Message: If you're in bonds and you're not a trader who's ready to flip them, while these Wile E. Coyote bonds stay suspended for a short interregnum, when the mass rush for the exits begins, then get out of them now and get into gold or other hard liquid assets. PS. Leave Britain while you still can.

No comments: