The Bond Bubble

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QUESTION: Dear Mr. Armstrong,

Thank you for the amazing information you provide so freely. I have been trying to warn friends & family about the bond bubble that you have identified. It’s easy enough to explain why international capital flows are pushing the USD and bond market higher, but I am having trouble explaining WHY the US bond bubble will pop after 2015.75.

I understand that the 8.6 year cycle is the underlying pattern, but what will actually cause the bond market to drop? Will it just be a loss of confidence in US bonds, based on the defaults in Europe and in emerging markets, or is there more to it?

I am grateful for any light you can shine on this.

Many thanks,

– A

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ANSWER: Historically, CONFIDENCE is a contagion game.  Herbert Hoover wrote in his memoirs how capital acted during the 1931 Sovereign Debt Crisis. With interest rates going negative, this is the extreme point in PUBLIC confidence. So how far will it go? Will you pay the government 5% to hold your money? Once one government cracks, people will lose confidence gradually in all governments. The primary difference we have this time is the hunt for loose change. This is making it extremely difficult to protect yourself when they are hunting everything. You cannot even take $3,000 out of your account without setting off red flags.

This is why I say you should have cash and gold COINS, not bullion. Not that we are headed into the Mad Max or Hunger Game scenario, but with money going electronic, you can find everything frozen. Just have plan B. You need something that is recognizable by the public, and that includes CASH.

All I can do is advise you on what has happened before. Once one country goes, capital will look around and turn on whoever they think is next. Eventually, this will move from one to the next. The dollar will be the last man standing. After that, we are looking at some new world currency that should emerge. We have reached the extreme point in government debt.