All hell broke out in the credit markets during the overnight hours last Thursday morning, I’ll bet you didn’t even notice it. Before getting into the meat of this piece, it is important to understand “what’s important”. The press constantly harps on the “Dow Jones this or the S+P that”. People come home from work and turn on their TV’s to see what “the market” did. Others have their smart phones or computers at work set to display the stock markets to keep themselves informed.
I am going to tell you, the stock market(s) are merely a side show to the grand Big Top circus of the credit markets. This is true in the U.S., all of Europe and Asia, it is true everywhere. This is the case because the credit (bond) markets are so much larger than the equity markets. The world revolves around credit. Everything revolves around credit. Our daily lives will be turned upside down when the credit markets seize up, and yes, I said “when”, not “if”.
Without a fully functioning credit market, distribution will break down, real estate markets will cease to exist except for cash purchases or barters. Companies will cease to exist because their access to money to run their companies will be nonexistent. Amongst many other “effects”, cash or currencies themselves will also be affected. All currencies everywhere on the planet are a function of, backed or supported by, and actually exist solely as a result of functioning credit markets. The saying goes, “money makes the world go ’round”, this is not true today. Today, “credit makes the world go ’round”!
With the above as an understanding, what happened last Wednesday night/Thursday morning in the wee hours was terrifying. Globally the credit markets began to melt down! This was a global event and almost ALL credits were being sold. To put this in perspective, German bond yields went from .59% to over .76%, this was nearly a 30% rise in yields …within hours. Remember, Germany is considered THE safest credit in Europe. The 10 year bund was yielding under .05% just two weeks ago, the yield had risen more than 15 fold!
Within hours of the U.S. market opening, the central banks of the world had stepped in and brought yields back to mostly unchanged. Can you imagine how much capital had to be deployed? Of course, much of this was done via derivatives but what was the end result? More derivatives outstanding and the central banks have again levered their balance sheets further to save the day. The intraday losses on both credit and their derivatives must have been staggering, had yields not returned to unchanged, this could have torpedoed the entire system.
What is my point here? First, the movements in terms of capital were huge. Intraday, literally trillions were won and lost. If the central banks had not stepped in and yields ended the day at their highs, many losers would have been more insolvent than they probably already are. As I have been saying for several months, I believe there are dead bodies out there, only the financial coroners will not issue death certificates. In other words, …insolvencies are being hidden!
Secondly, the derivatives market (Euronext) conveniently “broke” and was closed down , this gave the central banks a chance to step in and restore order. What if the market didn’t “break” (or was broken)? Could the central banks have worked their magic against a market in panic or did the “break” allow them to push a market where the momentum had been stopped?
Now for the most important question, did you even know this was happening in the wee hours of Thursday morning? Did you know about it when you woke up Thursday morning? Or during trading on Thursday? Did you go through Friday and into the weekend unaware that the credit markets melted down, actually broke and were rescued? I have one more question for you, do you understand why this is even important?
Let me finish by answering the last question first, then you should decide for yourself whether you need to rethink your outlook. What happened last week is important because it IS going to happen. It is only a matter of time before the global credit markets break down. This is a mathematical certainty because there is too much debt for the global economy to support. And this at a time when there is less than ZERO premium (interest) to compensate for risk!
I have said all along that this will be an overnight event and will take less than 48 hours to circle the globe fully. It may take less than 24 hours. Had the central banks not stepped in, the panic could have spread to the U.S. and into the close. Another round on Thursday night/Friday morning may have put forth a situation where U.S. markets did not open.
Now ask yourself this, were you prepared for the markets to not open Friday morning? Do you own what you want to own should the markets close and not reopen for a couple of days, weeks or even months? Are you listening to Edelson or being scared by Dent into not owning gold or silver? You do realize gold and silver are THE only monies out there that are not “credit based” or derive their values via the credit markets …which ultimately will be closed?
Something very serious is happening behind the scenes, what exactly we cannot know. We can however do math and know that if something “bad” happens with the amounts of debt, financial leverage and derivatives outstanding, the result will not be “good”. Please, do whatever it is you think you must to prepare. This one episode alone should be enough to show you, “you didn’t even notice it was happening”. To save you the time of commenting and telling me this will continue as “business as usual”, the central banks cannot save the world forever as their own balance sheets are rotten to the core! They have done this to themselves…
Way to go! Now, how do we get to see and read your writings?
thanks Red #1, I will advise via this blog and other websites that have carried my work.
Sorry Bill, but this will continue for a few
more years. These people control the printing
press. The only way it stops is when the printing
press is taken away from them. Just look at Japan
it has been going on for over 20 years. The U.S.
has just began and is maybe five years into the
critical stage. I suggest living well and being
happy. This kabuki theatre has a few more years
to run.
you are willing to gamble on this being correct and not sooner?
I sit on a man’s back, choking him and making him carry me,
and yet assure myself and others that I am very sorry for him
and wish to ease his lot by all possible means
– except by getting off his back.
Leo Tolstoy
oh ya… dragon and bear have join military show in middle east? and more deals sign during the WWII show? even the tiger is telling the eagle to p*ss off their “internal” affairs… and now greece is offer BRICS banks seat? there are plenty to make the world go round at the speed of light
and these monkey are still thinking there is tomorrow
funny thing is when the dam cracks
it burst and crumble not trickle and drip
it be a rude awakening to be slam into the ground
even fro shoulder heights
it would hurt alot
thats measurement of the confidence and faith of the “invincibility”
and God knows what drills are they putting up for show in your backyard?
just to boost back and reclaim their wounded murderous ego…
run forest run!
while there is still ground beneath your feet…
pretty much, yes.
Anyone that has the ba__s to bet that this can go on for years is playing Russian Roulette with a almost fully loaded gun.
There are so many bullets that could take this down at the blink of an eye that it is just not worth the gamble.
Better to walk away with piece if mind than to stay awake at night wondering if today is the day the system goes down by design or by accident.
One year early is better than 1 day late.
yes Mike, a very dangerous game of “I’m smarter than the market”.
Great post as usual. Yes, I had noticed Thursday morning that something had happened. I almost tumbled backwards off my yoga ball when I read the US treasury yields. No, I didn’t know what happened, nor the significance. Notice the US 10 yields are still elevated. This morning they were 2.21, and a moment ago were 2.24.
On a lighter note, maybe it’s time for me to break down and buy a comfortable but sturdy chair to read the financial news. I almost hurt myself.
…but a chair will do nothing for your abs.
AAAAAAAA! 2.27 now.
when they do lose control, it will go very fast and EVERYONE will know it is over.
Maybe this is what you are talking about :
https://www.dropbox.com/s/33e2nq07zpp46ob/Bonds.jpg?dl=0
yes.
“Did you know about it”? Call it an uneasy suspicion, when the Euronext (bond) market ceased trading and put forth an advisory that it was “experiencing” difficulties with communications.
Considering that +50% of global government bonds have rates below 1% and there are $5.3 trillion of government bonds that now have (-1%) negative yields, the search for “credit” of an unencumbered caliber has approached panic proportions.
You are correct Bill, not a question of “if” but of “when” the global credit markets freezes up. It will make the 2008 credit “crisis” seem like a Sunday walk in the park! Just one single fact during a global credit freeze – no issuance, nor honoring of “letters of credit” for global trade. Everything stops.
yes, like hitting a bridge abutment.
Bill, How could we have known? You didn’t tell us until now and God know no one else is going to let us know. Thank you for the heads up. As I’ve told you before, I read everything you pen and wait eagerly for it. I just don’t comment much. I will tell you this, I usually buy my silver from a brick and mortar place in So Cal because I like to take possession of it immediately. Last Friday I found myself in a position to buy more but since I’m not at my CA house I had to order it. And since I had to order it and go through those motions anyway I decided to order it from Miles Franklin. I chose them because of you. I think a company who would go the extra mile to make your wisdom available to us is one worth supporting.
thanks Lenn, I appreciate your support and MF appreciates you business!
Way to go Bill.
Now you’re communicating.
When I read Sprott/Embry/Rule, and even sensible Turk, when I read king world news ,it’s always: “danger,danger,danger, sky about to fall, BUY PMs!”
Well, for 4 years now PMs have gone down,down,down. Yes, I do think there is a conspiracy by CBs and gov to keep them down. Nevertheless, they can (and have) persisted longer than anyone imagined.
What’s that’s saying, “the markets can remain irrational longer than any individual investor can remain solvent”
If a PM proponent is writing a blog about the benefits of PMs, yet they ignore the lesson of the last few years, then they have no creditability in my mind.
Either grasp the bull by the horns and confront the reality of PM suppression or lose credibility.
You’ve upped your game lately and are more coherent with timely, pertinent facts.
P.S. I read zerohedge every day, so yes, I caught the semi-bond meltdown and also noted that CBs immediately stepped in.
nevertheless, all roads ultimately lead to gold and silver in the current environment/fix. If gold and silver have been “held down” and there is in fact “danger, danger, danger” ahead, Sprott, Embry and Turk have all been correct but “proven” incorrect by rigged markets. Does this mean they are wrong?
Owning physical metal without margin, no one will EVER be insolvent no matter how long it takes!
Bill
What do you think about the theory that the bond market will be the LAST to go…that TPTB will sacrifice the stock market first…
thx Libertybella
when this thing goes, it will ALL go together in my opinion.
Agreed, Bill. The US$ and US Treasury paper are so interlocked that they cannot be separated. If one fails, so will the other. There might be a brief time between one failing and the other failing but it is likely to be a couple of hours at most and more likely just a few minutes.
One can only imagine the furious scrambling that will occur as the big investors catch wind of a collapse of the US$ or UST paper and rush the exits for all they are worth. Typically, he who exits first does the best with the value of everyone else’s holdings declining rapidly in relation to their escape time. The longer it takes to exit those markets, the poorer those people will be.
It probably won’t be until that moment that people finally grasp the true nature of “counter-party risk”. Those of us who understand that now, of course, are not participating in the debt markets but likely still do have US$ denominated assets. Those would be slaughtered while gold and silver buying rise very quickly to a complete mania. Those of us who were young adults back in 1980 well remember the silver and gold mania that swept the US as silver went to $50 an oz. and gold went to $850 an oz. We could easily see that again but modified for inflation to at least 3-4x those prices.
yes Ed, at most a few hours. I also believe the “door” will be far smaller INTO gold and silver than OUT of the paper markets as metal will go no offer entirely.
That is my view Bill.
The timing to buy PMs should be based on your reason to buy PMs.
I buy them for insurance purposes. In the event that they do loose control and fiat and bank accounts do take a hit I want to have an edge of sorts.
Normally physical PMs are not bought as an investment for obvious reasons. However, in times of strife and economic turmoil like now they could in fact provide a substantial increase of value, that time will tell us.
Nothing is a given when it comes to the future because Governments can change the rules mid game and that is another reality we must deal with..
The only person I can blame if I called it wrong is myself.
Society is out on a limb and the wind is blowing hard.
The best place one can be now is …..to have no debt or little debt.
Have a clear understanding of the third party risks in relation to your personal assets.
Have a stack of PMs sufficient to offset the losses you potentially could incur if the banking system does in fact fail in whole or in part.
Hug the ones you love and pray because you cannot walk the path that is ahead of us without guidance from a power superior to ours.
The price of paper PMs day to day is of little value to me.
What matters is owning physical IF and WHEN the need to own them becomes relevant to feeding my children and their children.
unfortunately, there will be a use for physical metal.
I strongly agreed with you Bill and those that do not feel the need to protect themselves will likely be left out on a limb.
Logically you are right about all the fundamentals. That’s physics. In fact however, all the markets are controlled by governments, and that politics. If any private entity wants to control credit they can only do so through the system controlled by a government. Ask the Hunt Brothers how the real world works. The rules can change every 5 minutes.
Credit will not freeze up while the presses run; the presses will run till inflation is out of control, and only then after all price controls have failed. When hardware store inflation where I shop hits 5% a month I’m worrying. I’d say we’re at 1 to 2 right now.
I buy silver nearly everyday because it makes me feel good.
are you sure credit will not freeze up? I personally will not make this bet.
That would not be a good bet to take. Almost all of the damage done to the markets in 2008 were the result of a credit freeze-up. What has happened before CAN and probably will happen again.
We are susceptible to these kinds of problems because economists and politicians continue to confuse credit with money. Credit is not money or payment. It is the promise of payment.
J. P. Morgan said it best a long time ago when he said that “Gold is money. All else is credit”. That is as true today as it was 100+ years ago.
my point exactly, “credit” will try to crowd into “money”, it won’t fit.
Bill,
Financial “gurus” such as Jim Puplava and Martin Armstrong claim that when the bond market bursts that will force money to rotate into the stock market for the final blow off phase in stocks and ensuing bust before the ultimate move that forces precious metals and commodities into a parabolic bubble. Thoughts???
My thought is that if the $45T US bond market were to “burst” (collapse?), that in and of itself would destroy the US$ as a viable currency. There won’t be any rotation into the $9T US stock market at that point because there would be no valid currency in which to conduct business. A newer and much more sound currency would have to be created first and sooner rather than later.
gold?
Bill,
Financial “gurus” such as Jim Puplava and Martin Armstrong claim that when the bond market bursts that will force money to rotate into the stock market for the final blow off phase in stocks and ensuing bust before the ultimate move that forces precious metals and commodities into a parabolic bubble. Thoughts???
Anthony
dreaming!
I’m kinda looking forward to and at the same time dreading when the price of silver per ounce equals my credit score.
” Credit score” what a joke!
good’ern!
Stupid question -what do you think happens to our electric system, or in rural areas the coop power/ wind energy systems in this situation?
Bill, I recently sold my house and got completely out of debt and used the profit I made to buy as much silver as I could. Now I’m sitting on my bullion and renting until something happens. I love real estate but for some reason I think real estate prices have to come down before I buy. Do you think I did the right thing and am I thinking straight? Your opinion?
you are! Not owning an inflated asset, not having any debt and sitting on a pile of “cash” (real money) is about as sound a strategy as there is!
Bill,
I have just finished yet another college undergrad course in finance and all is well….. do not be concerned Professors and text books are all teaching us to invest invest invest……in US equities….. oh the time value of money….
On a more likely note – I believe TPTB will abandon cash and go all in with electronic so they can better manage the shoe dropping…… and then they won’t be able and the other shoe will drop.
Thanks for all you do…
thanks Dave, don’t believe everything you read in textbooks!
Bill The Thursday morning slaughterhouse flash crash was midnight somewhere else and late afternoon in another venue. Yet all markets seemed to be awakened to handle this crisis so that by 9 AM Eastern time the equity markets opened. the world did not end. This event sounds a little like the question “If a market crashed in shanghai will anyone hear it’ Like the tree, there must be ears on. Someone heard the crash I did not and am usually attuned to big happenings in the market overnight since I get up before the NY markets start.
All this said, there will be a time, sooner than later, Greece anyone, when the fear factor is universal, the losses to overwhelming and the tide running far to fast for any intervention—much like the leaking dam that can be plugged but when pressure gets to high it explodes.
Holding silver and gold poses a question If the banks close, credit markets freeze and paychecks stop, converting PMs into conventional FIAT to take care of bills is problematic at best. If the coin stores are down and everyone is hoarding Benjamins, I wonder silver will be accepted at the local stores.
it will matter because even without ears, a tree falling does in fact make a noise!
The event , resulting in the ” Targeting ” of PM holders by the Government and Banksters ? Predictable
” Targets ” of the Banksters and Governments !
probably.
I hope to hell you are able to continue this predicting a sometime to occur event. Your logs are the only news I listen to! Well other than Andy and greg hunter. But to date for 5years “The Chaos Theory” has won. Peter Schiff way off timing, Sprott a great honest man must be frustrated. People like your last blogger could be renting staring at his silver for a while— I think he did the right thing. Now he can sleep better. Forget the corrupt markets and focus on helping real people. May the great spirit be with our sound money cause! Perhaps your enlightened words will help the ignorant/lazy?/spineless?/Americans wake up? But then you have strange dudes(odd is’nt he?) like Harry Dent mid-leading uneducated asleep Americans. I just hope your logic defies the Chaos Theory. Crash credit scam systems. Go sound money! Thanks Bill and Andy! Frank
thanks Frank, Schiff and Mr. Sprott have been correct but “made” to wrong, their logic is sound.
I’m a noob in asking these questions so bear with me please.
First, If I want to watch global credit market activities, what do I look for? The bonds and their yields? And if this is true, regarding yields, the higher they go up the more trouble it would generally portend?
Second, is Jim Sinclair the gentlemen, gold mine owner that appeared on Greg Hunters YouTube video blog a year or so ago and stated that he felt gold could hit $50k an ounce? If so does he still feel this way and do you share this sentiment Bill?
yes, yes, and yes but $50,000 may be laughably low pending on how far the dollar collapses.
Bill, in support of the observations stated by AGXIIK I have a mental image of a big hole in the bottom of a huge tank. The TBTF banks all make a concerted effort to plug the leak with reams of paper money. If you had a big hole in your boat and the sea was flooding in, how much toilet paper would it take to stop the leak? That pretty much sums up how this thing works. I agree that one day they won’t be able to stop the leak no matter how much toilet paper they use. Thanks for your clear insight and easy to understand examples. We hope to be able to follow your writing again soon
it happened again last night, the collapse is very near. Will advise on MF and other sites where my work can be found in the future.
Thank you Bill. I noticed what happened last week from journalist who are not part of the financial media cheerleading crowd. Most people would look at the absolute spread between 0.59% and 0.76% thinking it’s not much difference when compared to a rise to let’s say, 4%. They don’t look at the percentage change as you mentioned.
I am a Christian man who really believes that something dramatic will happen to the world economies by the fourth quarter of this year according to Bible events such as this year’s ‘four blood moons’ and the ‘Year of Jubilee’ coming in 2016 . In ancient Israel, every seven years were set aside for debt forgiveness with the Year of Jubilee (every 7 cycles) being the granddaddy of these cycles. It has now become an involuntary cycle for the world, the last one was 2008 but it was not the first. 2015 should be a doozy when combined with the Year of Jubilee. But even if it doesn’t happen this year, it will certainly happen soon after.
God Bless you Ron! You are speaking of the shemitah.
Bill spot on as usual thank you for the information – as I have said before I am a part time ecom hack, so it good that you lay it on the line for people like me / us. One day in the future if your in OZ I will buy you a Pint with a bit of silver sliced off my 1k Bar.
God bless and thank you.
thanks AA, we in fact had another meltdown last night in credit markets.
I bought from Miles Franklin because of you. You will be missed !
thanks Calwoman, we appreciate the business!
Thanks Bill. Yes, I was referring to the Shemitah. I just forgot to mention it by name.
10-4 Ron.
After stacking PM for decades, it still gets frustrating knowing the stack should be higher than it is. Retirement sure can play some strange head games.
the height of the stack itself or the dollar value? As long as you have a stck, the dollar value will take care of itself.
No, I didn’t notice it, I just heard those markets were roiling. So thanks for keeping tabs on this. The fact it is such a big deal and the public wasn’t apprised of the significance makes me think you are right – that this is huge. Thanks Bill!
James Carville’s famous old quote: “I used to think that if there was reincarnation, I wanted to come back as the president or the pope or as a .400 baseball hitter. But now I would like to come back as the bond market. You can intimidate everybody.”
it happened again last night, am writing about it for tomorrow.
Hello William Holter,
Politicians = Elected by the TPTB (The Powers that BE) = unrepresentative of most of US
Federal Judiciary & Supreme Court = supported the TPTB
SEC and other protective entities controlled by TPTB.
Military controlled by TPTB.
Bush “The Constitution is a living Document”
What can you expect? Gold & Silver is certainly one manifestation that seems very logical!
Are you really surprised by Guantanamo or the Bill of Rights being usurped??
And what about a prime presidential candidate with the term liar imbedded in the name?
Roosevelt “People are educated by the are not informed”
Respectfully,
Wild Bill
I live in Sweden and was watching this in real time, and thinking “Holy Shit” as I saw the German 10-year bund surge, along with the surge in all of the other Eurozone bonds.
I was wondering something. Will central banks reach the point where they own ALL of the bonds? Is that possible? Is there a limit on how far they can go? I have to think that the BOJ owns most JGBs after years of massive debt monetization. Because I am sure that the ECB will be in there buying every time they sell off to cap the rise in yields.
what would their balance sheets look like?
Bill
I will miss your column very much.I truly look forward to reading it several times a week and am already having withdrawal symptoms. You are really able to first identify “the dots” and then connect them for us.
Will you please be sure to let readers know where they can access your writings once you join Jim Sinclair.
Barry Kaplan
thanks Barry! Yes, of course.
hi Bill, just wanted to reiterate Barry Kaplans words, and please leave a message on this blog where your writings will be going to. as i look at all of the data points, we’re edging over the cliff now, and will be in dire straights come this fall. martin armstrongs economic confidence model, baltic dry index, Shanghai containerized freight index, first quarter gdp,http://www.zerohedge.com/news/2015-05-13/us-recession-according-these-7-charts and on and on show overwhelming evidence
will do Derek, yes, we are already clearly in a recession/depression.
Dear Bill,
First off I’m very distraught that your going to be taking a monthly hiatus from writing, reading your articles is one of the highlights of my day. I hope you still continue to make regular appearances on USA Watchdog.
Anyway, is there anything parallel to what things look will look like when the you know what hits the fan? Will events in the U.S. mirror what’s happening right know in Venezuela, or will it really be Mad Max? Is what your saying is that for 3-6 months the whole is going to be like Zimbabwe in 2006? Should I stop stacking silver and buy a gun and start storing non-perishable food in the shed? How bad do you think its going to get in one of the better suburbs of Washington D.C.? Sorry, I know I asked a lot.
– Brendan
only taking a two week break and may pop out a couple articles so I don’t withdrawals (LOL). Mad Max is a distinct possibility and you should stock up on ALL necessities, not just silver and gold. Of course, you will need to defend these supplies…
I think the banks banning cash will backfire on them. The black market (free market) will always find a way to avoid the banks keeping track of their transactions. If cash is banned, something else will take its place besides using digital dollars. I think it would actually cause digital dollars to fall in value very rapidly and probably cause paper dollars to gain a little purchasing power as the underground economy will value the paper dollars more. Just because they’d be illegal doesn’t mean they won’t be used for a while. Once those paper dollars wear out and fall out of existence, the black market will probably migrate into using coins. Then eventually gold and silver again. I think banning cash will help us, not hurt us.
This is the first of your columns that we’ve seen, and we loved reading it. We are seasoned readers of thinkers such as yourself and we have been preparing.
Please include us in your list that will tell us where to find you in the future.
Thank you for being such a clear voice.
Catherine
glad you found it! Please browse my archives to see past articles. Will put you on the list.
I think your right but I think it leads to one world currency. The destroying of all central banks and all the world’s currency together. The only solution that will be offered is to replace them all with one currency and for it to be digital.
What happens to gold and silver if owning and buying them become against the law? With cash you could still buy them, tho it would be a crime. With a digital currency regime you could be totally locked out from being able to purchase them.
I think that’s what is being overlooked more then anything with the discussions of cashless systems.
yes, gold and silver could be outlawed but not everywhere in the world which is why you must hold some outside of your own borders.
Hi Mr Holter. I read your articles all the time as well each week. I would like to be added to the List also of letting us know how we can see your writings in the future, looking forward to more of your commentaries!
Carolyn
thank you Carolyn, Miles Franklin will put up a link as soon as I where to link to, we don’t know yet whether it will be to Jim’s existing site or if we will build a new one.