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Jim Cook

 

RUNAWAY SOCIAL SYMPATHY

Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

 
Commentary Of The Month
December 31, 2014
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THE BIGGEST BUBBLE IN HISTORY IS ABOUT TO POP

By Graham Summers

If you are an investor, your big concern should not be about what happens to stocks but what happens when the bond bubble goes bust. For 30+ years, Western countries have been papering over the decline in living standards by issuing debt. Sovereign nations spent more than they could collect in taxes, so they issued debt (borrowed money) to fund their various welfare schemes. This was usually sold as a “temporary” issue. But as politicians have shown us time and again, overspending is never a temporary issue. Today, a whopping 47% of American households receive some kind of government benefit.

All of this spending is being financed by borrowed money, hence the bond bubble, the biggest bubble in financial history: an incredible $100 trillion monster that is now growing by trillions of dollars every few months. The U.S. alone has issued over $1 trillion in new debt in the last eight weeks. The reasons it did this? Because it doesn’t have the money to pay off the debt that is coming due from the past so it simply issues new debt to raise the money to pay back the old debt.

Just about every major nation on the planet is sporting a Debt to GDP ratio of 100%+ and that does not include unfunded liabilities like Medicare or Social Security. This is why the Fed and every other central bank on earth is terrified of interest rates rising; because anything even resembling the normalization of interest rates would mean entire countries going bust.

It’s why central banks have kept interest rates at zero or even negative: again, they cannot afford to have rates rise. In the U.S., every 1% increase in interest rates means between $150-$175 billion more in interest payments on our debt per year. Forget stocks, the real issue is what happens when the Bond Bubble pops. When that happens it won’t be individual banks going bust, it will be entire nations.