Negative Interest Rates Could Cause a "Black Hole" in the Bond Market

We have been blogging about this topic for the last 5 years but we see some serious problems in the global financial system.

The Bible tells us that our current system will need to collapse to make way for a new cashless system...one that will require a mark for anyone that wants to buy or sell anything.

When America hits another recession, the FED may be forced into lowering interest rates BELOW ZERO.  Than means that they will CHARGE YOU to hold your money at the bank.  If you are retired and have $100k sitting in a 1 year CD currently paying you 2% that's only $2,000 per year but imagine if they charge you $1000 per year (1% negative interest) to hold your money?  Many Americans would choose to go to the bank and take out their money and put it in their gun safe.

This would cause a run on the bank.  Since America is the ONLY reserve currency on planet earth, this could cause a crisis in confidence that would spread across the entire globe.

And since our whole financial system is based on "THE FULL FAITH AND CONFIDENCE IN THE U.S. GOVERNMENT"....the confidence could dry up like a puddle in the dessert.

There’s a multitrillion-dollar black hole growing at the heart of the world’s financial markets. Negative-yielding debt -- bonds worth less, not more, if held to maturity -- is spreading to more corners of the bond universe, destroying potential returns for investors and turning the system as we know it on its head. Now that it looks like sub-zero bonds are here to stay, there’s even more hand-wringing about the effects for mom-and-pop savers, pensioners, investors, buyout firms and governments.

1. Why invest in a bond that will lose you money?

Typically, bonds are the safest assets on the market, so many investors seek them out at times of heightened market stress, say a U.S.-China trade war or tensions in the Persian Gulf. A bond can have a modestly positive coupon when issued by a government, institution or company, but once it starts trading, high demand by investors can push its price up -- and therefore its yield down -- to such an extent that buyers no longer receive any payment. Some funds track government bond indexes, meaning they must buy the bonds regardless of the yield. And some investors can still make positive returns on these bonds when adjusted for currency swings.

2. How much is being bought?

Negative-yielding debt topped $13 trillion in June, having doubled since December, and now makes up around 25% of global debt. In Germany, 85% of the government bond market is under water. That means investors effectively pay the German government 0.2% for the privilege of buying its benchmark bonds; the government keeps 2 euros for every 1,000 euros borrowed over a period of 10 years. The U.S. is one of the few outliers, with none of its $16 trillion debt pile yielding less than zero, but across the world, strategists are warning that the problem may get worse.

3. Why is this reason for worry?

Negative rates are at odds with basic principles of the global finance system. “One important law of financial logic –- if you lend money for longer, you should see a higher return –- has been broken,” wrote Marcus Ashworth, a Bloomberg Opinion columnist covering European markets. “The time value of money has essentially disappeared.” (Has it ever: The so-called century bonds issued by Austria two years ago, which mature in 2117 and initially offered a 2.1% return, now yield about 1.2%.) All this can push investors into riskier bets in the hunt for returns, raising the chances of bubbles in financial markets and real estate.

https://www.washingtonpost.com/business/the-black-hole-engulfing-the-worlds-bond-
markets/2019/07/13/1702868a-a540-11e9-a767-d7ab84aef3e9_story.html?utm_term=.aac1711c7e86

The world is being shaped to enter the Great Tribulation.  To me, this is just one other sign of the closeness of this major event.

We don't know the day or the hour of our Lord's return but we shouldn't be surprised at His coming if read the Bible at the same time we are reading the daily headlines.