The negative earnings on millions of Americans’ life savings may be the pin that punctures the international Currency Clique bubble.

The US Central Bank (FED) is part of an International Currency Clique (ICC) that has created tens of trillions of new dollars. The US dollar market has been prevented from collapsing only because the Euro, the Pound and the Japanese Yen are even more inflated than the dollar. We are dubbing these four the ICC. Each central bank electronically prints its own currency to prop up its respective economy through the sale of “bond” (“bunds” in Europe) and other debt instruments. Each also prop up the other’s currencies, as if all are controlled by a giant hand. This is our strange money world, where central banks scheme together to control all major currencies. The International Currency Clique has driven interest rates down, in several countries to literally negative rates, where investors must pay the banks and treasury to hold their money. The clearly robs savers by destroying the real value of saved money, as indicated by the nominal interest banks pay the public in the USA.  Yes, the big issuers have concocted a scheme to keep each other’s currency stable within certain ranges, no matter how much money each one must print to keep it respective economy afloat.  The Achilles heel of the system is the saver. When we begin to pull our deposits out of non productive bank accounts and low paying government debt, the ICC will collapse. Where will this money go?  Probably much of it into gold and silver.

On might ask, how does the ICC overcome competition from developing, resource rich countries?  It ever so simple, The ICC threatens, or make war on financial competitors, which is why the Middle East oil producers have remained under the Dollar orbit.  We have discussed these killing wars in many papers, beginning in 1991.

But no money printing program, no contrivance of IMF, BIS and other supra-banks can rescue the overpriced government bond markets from collapse. The US Treasury debt, elevated by wars and domestic scams, has finally crossed the breaking point where even the most optimistic and gluttonous bond traders at Goldman Sachs and JP Morgan doubt if the can  keep the Treasury bond market afloat longer. This market is the Achilles heel of the dollar. Holders of self-managed IRAs, pensions and investment plans need to get free of long-term Treasury Bonds because these can lose 1/3 to 1/2 of their value in a major downturn.

A caveat about your author:  neither I nor anyone else I know is fully qualified to predict the timing of the crash of US Debt bubble (which means the dollar).  It appears nothing this large has ever happened before.  Your author did spend a prior life, before there was a We Hold These Truths, in the investment business.  I “experienced” Wall Street training, with dozens of lectures about the effectiveness of the FED in controlling our financial destiny.  I did not begin to comprehend the meaning then, but I did many years later.  Fortunately I am not the only one talking about the risk to savers of US Debt collapsing. Bill Gross seems to be one of these.

Optimistic advertising in the Marina district of Dubai, United Arab Emirates, November 19, 2013. REUTERS/Caren Firouz

Gross is without much doubt, the most famous bond investment manager and promoter of our day.  He is responsible for building a half trillion dollar management company called PIMCO, although he no longer works there.  Unlike me, he is a self-made billionaire.  David Floyd, writing for Investopedia on April 11, 2016, in a story entitled “Surviving Negative Interest Rates” quoting Gross:  “Other things to avoid include high yield debt and ‘the seemingly momentum driven higher prices of Bunds and Treasuries that negative yields have produced, since a 30 year Treasury at 2.5% (yield or return on capital) can wipe out your annual income in one day with a 10 basis point increase.'”  Here Gross is referring to an increase in yield or total return on investment, which is the same as a drop in market value.  Please think of price and return on bonds as a seesaw in which ends always move in opposite directions.

The story continues:  “He (Gross) begins his letter with a solar metaphor: the sun, which sustains and nourishes life, will one day devour the earth. The sun, in this image, is the ‘global, credit based economic system’ which, according to Gross, ‘appears to be in the process of devolving from a production oriented model to one which recycles finance for the benefit of financiers.’  He cites astounding growth in credit, from $1 trillion in the U.S. in 1970 to $58 trillion today.  To Gross’ thinking, negative interest rates in Japan and Europe are what happens when this debt star enters its death throes.  Investors are left with almost nowhere to turn, as bank deposits, equities, Treasuries and Bunds have returns that are ‘inadequate relative to historical as well as mathematically defined durational risk.'” (my emphasis)

Bond language can be confusing.  But is there anyone over 15 who does not know our national debt is approaching $19 trillion? And, that number does not include all the unfunded liabilities, including the deficit in the Social Security Fund and the Veterans’ Pension Fund.   Few are alarmed, because the dollar continue to seem strong in international markets.  After all, it is still the reserve currency for the world.  If the dollar is somewhat on a par with other major currencies, few worry that the return on their own bank deposits is near zero.  Nominal return on money that is being diluted by inflation is confiscation.

We will look at Treasury debt, the instruments through which every boated dollar is issued.  Unfortunately enormous amounts of savers’ dollars have been converted into these debt instruments and are in harm’s way.  Central banks absorb the surplus of bonds (debt) issued to keep the price moving up, but they cannot buy all the debt!  The bulk of Treasury debt is owned by individuals and developing countries’ governments who cannot afford to hold bonds unless they are convinced the price will not go down.  After three decades of rising bond prices and declining interest rates (remember the seesaw) reality is setting in; very slowly at first, but like all markets this one will accelerate.  Treasury bonds may, in a very few years be worth as little as half what they sell for today! How would you like to have your entire retirement in these–Social Security does!

What are the inevitable consequences of near zero interest rates which deny most Americans earnings on our bank deposits?  A lady recently showed me her savings account at Wells Fargo that earned only $68.00 per year on her $68,000 life savings, only 1/10 of one percent per year!  Her year’s earnings will buy only one nice, but modest lunch out for her and her family!

Imagine yourself and millions like you sitting on top of a giant inflated balloon that is in turn riding on a bed of nails.  The question is not, will the balloon pop, but when–and what will happen to those on it when it does?  ZIRP (zero interest rates) and NIRP (negative interest rates) are the new schemes from the world central banker monopoly.  How can the dollar be “strong” when we know so many trillions are being printed every year that the banks cannot pay a reasonable return for your savings account?

The answer is ominously simple.  The “Central Banks” of all the superpower industrialized nations have an unspoken agreement among themselves to hold up each other’s currency.  Thus the Bank of England, the EU Central Bank under figurehead president Mario Draghi, the Bank of Japan,  and the Federal Reserve Bank of NY figure-headed by Janet Yellen, to name the biggest, can all print virtually unlimited amounts of their respective currencies to buy and sell each other’s currencies in the world market.  And they do.  They balance out a parity of sorts, where each currency floats in a limited range, but no big currency ever collapses from overweight.  Each central bank is privately controlled and funded, probably by an international elite, and each one has an exclusive contract within its own jurisdiction to do this. For instance, the FED has the money franchise on America. 

A friend asks me with convincing logic, “Yes, I agree it is a bubble, but why can’t they kick the can down the road for 5 or even 20 more years?”  The answer is simple, though it took me years to see it. The thin spot in the balloon is not the dollar itself, which the central bankers seem to be able to support, but the US government debt market, which they can not!  Each central bank supports its own currency through the purchase of its own government issued debt. The  FED has accumulated about $2.4 trillion dollars, about 13% of total bonded debts of our treasury, according to its own public statements.  These purchases cost the real owners of the FED almost nothing since laws allow it to print the dollars to pay for US Debt. And in the process of propping up the debt market the FED has conned investors and foreign governments into buying, many times, their phony purchases, upward to half of the near $19 trillion owed by the USA.  And, Social Security and the Veterans’ Pension funds own most of the rest. The FED also acts as a stooge, the first one to jump in the line.

Printed dollars are used day in and day out to make the dollar seem to be stable in the world market of failing currencies.  Thus the FED has caused a 35 year inflation in the value of Government bonds.  The bubble is revealed in the dollar quotes for bonds.  The price of this government debt in the open market is the bubble–so stratospheric we can barely imagine it, and it is breaking as we watch. 

The piercing of the dollar balloon is unstoppable because private holders of the debt, including newer industrialized counties, China, Russia, India, and a very dubious friend, Saudi Arabia, each own a huge chunk of US Debt.  More ominous yet for holder of US debt, mutual fund and institutional investors, who manage America’s IRAs and pensions, which control the critical mass of outstanding US debt.  These private investors, plus the not-so-friendly developing governments, own an uncontrollable mass of US Debt. When, not if, these holders are forced by the public to start selling, the balloon pops!  

Are the investors catching on, or will they always trust those who control the central banks?  We have quoted Bill Gross.  Now hear the words of a few institutional money managers from the April 25, 2016, Yahoo news story, “Most Dangerous Bond Market in History”‘:  

“Bond investors are taking bigger risks than ever before. Yields on $7.8 trillion of government bonds have been driven below zero by worries over global growth, meaning money managers looking for income are pouring into debt with majorities of as long as 100 years. Central banks’ policy is exacerbating matters, as the unprecedented debt purchases.”

Also quoted was, “Fabrizio Fiorini, chief investment officer at Aletti Gestielle SGR SpA, which oversees more than $17 billion, said from Milan. ‘Time is against the long end of the bond market. Even if an increase in bond yields may not be so strong, the positions are so huge that the damage can be massive.'”

Another recent story tells of an international bond issuer who faced reality and paid up to get money.  The story might have pointed out that Argentina’s bonds pay investors up to 8% per year, over 80 times what Wells Fargo pays a saver.  No wonder they were able to sell their debt.  Bravo Argentina, you paid the honest price to sell your bonds. May you never default again!

“The ultimate bond insanity seems to come from Ireland and France who sold bonds that will not mature for 100 and 50 years respectively,” Bloomberg News reported last week…”Ireland’s 100 million euros ($112 million) of bonds due in 2116 were issued to yield 2.35 percent … The story goes on: “The yield on German 10-year bunds has now slipped to about 0.23 percent, dragged lower by the ECB’s program of bond-buying, which was expanded to 80 billion euros a month in March. Meanwhile, in Japan, all of the nation’s sovereign bonds yielded less than 0.4 percent last week, a result of the surge in the securities since the BOJ introduced a negative interest rate earlier this year.”

An Independent financial writer Robert Mish, had this to say, and I agree:  “ZIRP (Zero Interest Rate Policy) has been replaced by the new central bank rage, NIRP (Negative Interest Rate Policy). The only tangible result of these central bank actions has been asset bubbles that are guaranteed to pop…Today, the Bank of International Settlements (BIS), finally issued a warning to the central banks of unknown and unwelcome consequences of NIRP….Negative interest rates risk backfiring the longer and more deeply central banks in Europe and Japan venture into this unconventional monetary policy, economists from the Bank for International Settlements have warned.” Mish cites astounding growth in credit, from $1 trillion in the U.S. in 1970 to $58 trillion today.

To summarize the problem, the dollar is made to look strong because other major currencies are as bad or worse. This can be orchestrated only because the “developed” countries’ central bankers are, we conclude,  in league together.  In fact it has been impossible to learn which individuals actually own the FED and all the other central banks.

So why is We Hold These Truths passing out what seems to be investment advise?  Because we want our readers to survive for a while so they can continue to help us with our mission.  I suggest a very simple path that I would follow if I had an IRA or managed pension plan.  Even if I had left investing to the “experts” for all my life I would tell them to get out of every investment with significant exposure to long-term US Treasury debt, directly or indirectly.  That means any US debt longer than two years until maturity.  I would tell my account manager (if I had one) to get those dollars out into  gold or silver, or something linked to the metals, such as high quality mining companies’ stocks.

In the future we will post a very few, exceptional stories from others in  OUR MONEY that make sense to us in this time of pending dollar/debt crisis.  We will post them in a Category by that name…no charge, no liability!

Also:

 Induced Low Interest Rates Rob Savers (Carlson)

 US Treasury Bonds,The Godfather Of All Bubbles  (carlson)