Bond Market Bubble in Search of a Pin-Doug Casey

Wednesday, January 29, 2014
By Paul Martin

By Greg Hunter
January 29, 2014

Author/investor Doug Casey says, “We’re in a bond bubble. This is much more serious than the other bubbles because the bond market is much larger than either the real estate market or the stock market.” Casey explains, “What the government has been doing in an attempt to prop up the failing economy and prop up failing banks and brokerage firms is keep interest rates at very low levels, and that has taken bonds to very high levels. That bubble is in search of a pin at this point, and when it blows up, it will be much worse than what we saw when the recession started in 2007. ”

On the subject of the Federal Reserve, which just passed its 100 year anniversary, Casey says, “The Fed has destroyed, by their own statistics, about 95% of the value of the dollar, and at this point, the Fed has created trillions of new currency units in a desperate attempt to prop up the structure of the economy which is resting on quick sand. They’re going to destroy the rest of the value of the dollar. I have to compliment Bernanke of having gotten in and gotten out when he did . . . but Yellen is not going to be so lucky. I think we are going back into the hurricane late this year, certainly no later than next year. It is going to be much worse and last much longer and be much different than what we experienced in 2008 and 2009.”

On the timing of the bond bubble blowing up, Casey warns, “Anytime between tomorrow morning and the end of the year is how I would put it. I am also surprised this has gone on as long as it has gone on . . . Things that you would expect to happen often take much longer than you think to happen, but once they get underway, they happen much more quickly.” Casey goes on to say, “We’re going into what I call ‘The Greater Depression.’ It’s going to be much more serious than what happened in the 1930’s. . . . A depression is a period of time when most people’s standard of living drops significantly. Now, why is the standard of living in the U.S. as high as it is? . . . Well, debt is the major reason for it. When you have debt, it means you are consuming capital that somebody else has accumulated in years past or you are mortgaging your future that you are going to earn in the years to come. There is a gigantic amount of debt in the U.S. at all levels—governmental, corporate and individual. Debt is a sign you have been living above your means. It’s a debt bubble, and this is a major reason the government wants interest rates low. When interest rates rise, it makes it harder for people in debt to service that debt. They are simply delaying the inevitable at this point, but it is inevitable what is going to happen, and we are going to have a fantastic depression.” Casey adds, “There are a lot of people who are eating caviar who should be eating rice. The businesses that are catering to those patterns of production and consumption are going to go bankrupt, and their employees are going to have to find new jobs, and I don’t know what they are going to do.” When things get really bad, don’t expect any global government to come to your rescue because Casey says, “None of the governments of the world today are solvent, and none of the banks in the world today are solvent. The big banks and governments of the world are like a couple of drunks that are leaning against each other to hold each other up.”

On physical gold and silver, Casey says, “Gold is more important to own and perhaps a better bargain now than in 1971 or 2001, and the same is true of silver.”

Join Greg Hunter as has goes One-on-One with Doug Casey, author of the new book, “Right on the Money.”

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