‘The Great Financial Writeoff’

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‘The Great Financial Writeoff’

Aug 3, 2019 | 21:25 1 Agrivillers take note: Negative debt globally has exploded in 2019 . . . . As of August 2nd, global negative debt exceeded $14.5 trillion. This is a recent jump of $650 billion over one (1) month. Negative debt now makes up about 26 percent of total global sovereign bonds.

Also, U.S. and Cdn long term treasuries appear headed toward 0 percent. Negative debt now centred in Europe and Japan. Bond market crisis appears looming.

This is the beginning of the Great Financial writeoff (IMO) heading into 2020 and beyond. And central bankers are now powerless to stop . . . . Reply With Quote
SASKFARMER's Avatar Aug 3, 2019 | 21:49 2 Or is that the plan all along start again at zero.

Except the minions. Reply With Quote
Aug 4, 2019 | 00:13 3
Quote Originally Posted by SASKFARMER View Post
Or is that the plan all along start again at zero.

Except the minions.
Saskfarmer . . . There is now a black hole engulfing world bond markets. There will be financial failures. And cutting rates now is quite ineffective (IMO). Central banks have run out of ammo and can no longer kick-the-can down the road.

The Keynesian hangover is now well underway . . . . Reply With Quote
Aug 4, 2019 | 03:15 4
Quote Originally Posted by errolanderson View Post
Saskfarmer . . . There is now a black hole engulfing world bond markets. There will be financial failures. And cutting rates now is quite ineffective (IMO). Central banks have run out of ammo and can no longer kick-the-can down the road.

The Keynesian hangover is now well underway . . . .

Errol

Swiss have had negative rates for a couple years, japan has had zero for a decade...why so sudden and alarmist now?

There is nothing stopping this from going on for another decade or more. The only time we really collapse is if the people wake up to the fact that money all is fake and they lose faith in the dollar as money. In reality that may never happen in our lifetime. People are brainwashed heavily by the easy access to media and propaganda (more than ever). With the usa and Canada being the cleanest dirty shirts....we are going to get a lot stronger before we get weaker. Reply With Quote
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  • Aug 4, 2019 | 06:18 5 So does actually cause inflation or hype inflation eventually.

    The basics of Keynesian model is govt spending? Create more jobs private and public.

    Either borrow money for the jobs or raise taxes or just print money, once economy comes good cut back on the govt spending?

    Which won’t happen so it’s a halfway house somewhere between capitalism and socialism
    Last edited by malleefarmer; Aug 4, 2019 at 06:30.
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    SASKFARMER's Avatar Aug 4, 2019 | 06:38 6 I have a question. Didn't Brazil and other countries get massive right downs or how are they growing when theoretically they were broke. African countries etc. Add who can ever pay off these debts.

    Massive debt all over the world to who?

    Like ontario will ever be able to pay it off. Reply With Quote
    biglentil's Avatar Aug 4, 2019 | 07:26 7
    Quote Originally Posted by malleefarmer View Post
    So does actually cause inflation or hype inflation eventually.
    Its like a tire with a leak, monetary stimulus is like adding air to try and keep it inflated. You won't see hyperinflation until the tire blows, at that point no amount of air will work. Lehman Bros failure in 2008 popped the tire and interbank credit markets seized and the machine came to a stop, but with massive bailouts (a patch) and massive amounts of stimulus (air) the monetary system was saved. The Fed was supposed to pull air from the tire (QT) return rates to 4% but failed they just added air last week with the 1st rate cut since 2008. Is the tire in worse shape than the market knows? Lower rates add air but debt adds weight to the machine, and the machine is already over weight.

    For example:
    Even though Venezuela has the largest oil reserves in the world outside of Saudi Arabia the tire is hooped and no amount of air will inflate it (hyperinflation). The belief that a nations assets somehow back the currency is nonsense. Unless a currency is actually redeemable for hard assets its just pretty ink with a claim on thin air. Once the confidence in the tires ability to hold air is gone, that confidence is extremely difficult to regain.
    Last edited by biglentil; Aug 4, 2019 at 07:47.
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  • Aug 4, 2019 | 07:29 8
    Quote Originally Posted by Ache4Acres View Post
    Errol

    Swiss have had negative rates for a couple years, japan has had zero for a decade...why so sudden and alarmist now?

    There is nothing stopping this from going on for another decade or more. The only time we really collapse is if the people wake up to the fact that money all is fake and they lose faith in the dollar as money. In reality that may never happen in our lifetime. People are brainwashed heavily by the easy access to media and propaganda (more than ever). With the usa and Canada being the cleanest dirty shirts....we are going to get a lot stronger before we get weaker.
    Ache, the acceleration of global negative debt has exploded over the past nine (9) months. Since October, 2018, global negative bond yields has jumped 150 percent. In Germany, the entire yield curve is now negative. Even a 30-year bond yield turned negative this past week.

    And this trend is apt to remain in high gear into 2020 which heightens the failure of bond markets (IMO). My apologies for sounding alarmist, but some markets could go into hell ‘n a hand basket . . . . Reply With Quote
    Aug 4, 2019 | 07:55 9 Errol, you must be really rich by now. If you are so damn convinced the sky is falling, short the bond market. Short everything- go for it! Reply With Quote
    Aug 4, 2019 | 08:10 10 Another crisis.....who is Trudeau going to write the cheque to this time....

    While Trudeau says the economy is good. ....he seems to be spending like it's not....

    And when does he quit sending money out of the country..... Reply With Quote
    Aug 4, 2019 | 08:12 11 Much appreciate your insight and comments Errol.

    It’s easy to point out problems, the wise know the solutions, and the smart do something about it.

    I am curious as to your solutions, and what if scenarios, with implications and opportunities,
    - short the Bond markets
    - buy real assets, land - many have done that and now it’s unsustainable
    - housing many are predicting it to burst, yet people have to live some where
    - commodities grains, funds were pouring money in as it was safe, tradeable, liquid etc seems the funds found stock market again
    - will we see return by the funds into grain markets, more so and longer than before?
    - stock markets, why can’t they go higher? And if they crash or fall into long steady, slow decline where will the money go?
    - metals, gold? Investment or just every day commodities used in manufacturing
    - crypto’s, threat or opportunity, face book thinks opportunity, and they have been right more than most the last 10 years


    I’m interested in the cause and effects, risks and opportunities for my farming business. Reply With Quote
    Aug 4, 2019 | 08:20 12
    Quote Originally Posted by sumdumguy View Post
    Errol, you must be really rich by now. If you are so damn convinced the sky is falling, short the bond market. Short everything- go for it!
    Again, my apologies for touching-a-nerve, but markets are always right, not opinion . . . .

    Markets are now in the process of telling investors the true health of financial markets. Central bankers have failed miserably, talking up inflation until recently and pretending economies are healthy enough for rate hikes. QE has been a failure fixing nothing while producing producing far more capital than available investments. This created the U.S. stock market bubble. Simply, a parking lot for money struggling to find a home.

    It’s not my intent to stir the pot, it’s my intent to offer opinion ‘outside’ of the political and banking sector that is directly tied to the health of ag business. If this motive is an insult to Agvillers, then it is time to leave this forum. Reply With Quote
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  • GDR
    Aug 4, 2019 | 08:40 13
    Quote Originally Posted by errolanderson View Post
    Again, my apologies for touching-a-nerve, but markets are always right, not opinion . . . .

    Markets are now in the process of telling investors the true health of financial markets. Central bankers have failed miserably, talking up inflation until recently and pretending economies are healthy enough for rate hikes. QE has been a failure fixing nothing while producing producing far more capital than available investments. This created the U.S. stock market bubble. Simply, a parking lot for money struggling to find a home.

    It’s not my intent to stir the pot, it’s my intent to offer opinion ‘outside’ of the political and banking sector that is directly tied to the health of ag business. If this motive is an insult to Agvillers, then it is time to leave this forum.
    Keep the comments coming, always welcome.


    In this scenario won't the money keep flowing to the stock market and gold. I cant beleive the fund managers and the wealthy would settle for negative or even flat returns for more than short term. Would be pretty risky for funds to post consecutive losses, customers would be jumping ship even if the alternative isn't any better. Reply With Quote
    Aug 4, 2019 | 08:52 14 ...."...but markets are always right..."


    Can you explain those markets? Are they the markets where 27 billion of government money has been committed and more to come as the trade war goes on....

    Or is it that steel market in Canada that gets its tariff money back in the form of a subsidy and they continue with higher steel prices????

    Or is it that market where every so called capitalist gets a government cheque for creating a few jobs....

    Or is it that market where again those so called capitalists need the government to implement a TFW program because the capitalist won't pay for labour....since it reduces shareholder dividends...capitalists are welfare bums....


    Where is this market that is always right...sounds like the government is always involved in the market...

    The one exception is western canadian primary production....we are such noble people ...we pat ourselves on the back for using equity against government's treasuries that are impacting our markets that are...." always right " That's a bullshit statement....



    You have to also believe in Santa Clause , the tooth fairy , the easter bunny,,,and unicorns....
    Last edited by bucket; Aug 4, 2019 at 10:11.
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  • Aug 4, 2019 | 08:52 15 Yes Errol keep it coming.

    Buffet seems to favor ownership through stock markets, and Pattison buys companies outright for control?

    Every one has their preferences.

    I like to invest in my lively hood, what I understand, work life balance etc., yet government and politics is the main risk. Is it worse with Ag than with other businesses or industry? Reply With Quote
    Aug 4, 2019 | 09:20 16 The key takeaway here is that this is global, not isolated. Hyperinflation happens when it is one country who prints to pay off debts in foreign currency and the market then loses all faith in its currency and governance, quickly spiraling out of control. In that case there are alternatives, so no one holds or accepts the hyperinflating currency, instead trading it for another currency, or hard assets as fast possible before it is even more worthless.
    When it is occurring to all major economies at once, there are no alternatives, just some are really bad, and others just terrible, making it quite sustainable for longer than anyone thinks possible.

    In this case, everyone is offering negative rates, and many pension funds are mandated to hold government debt, plus other asset classes are deflating. Reply With Quote
    Aug 4, 2019 | 09:39 17 It is easy to comment on monetary and macro policy as opinions are free and welcome but as Rareearth says, “where’s the solution”? Opinions of “sky is falling” are cheap and are perpetual - I had a father who spent his life preaching the “sky id falling” theory. Thank God he never lived what he preached - we would be working at Walmart today. Reply With Quote
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  • Aug 4, 2019 | 10:30 18
    Quote Originally Posted by GDR View Post
    Keep the comments coming, always welcome.


    In this scenario won't the money keep flowing to the stock market and gold. I cant beleive the fund managers and the wealthy would settle for negative or even flat returns for more than short term. Would be pretty risky for funds to post consecutive losses, customers would be jumping ship even if the alternative isn't any better.
    Yes capital will shift in my opinion from bonds to equities, what isn't regulated by govt. Regulation was put in place in 2008 that a certain % (up to 40~) as bonds were deemed "safe". They have no choice. SEE THE PROBLEM? That's whats unique today compared to previous. The sheer size of the bond market is overwhelming, if there was a mass exodus it would double triple quadruple commods currency and equities, i have no idea the exact impact but it's massive.
    Then you need to look at the industries that place their entire holdings in bonds in short term and overnight, banking, insurance, etc. and the consequences of having them wiped out. In my opinion it isn't what the fed does that'll be the next trigger it'll be the ECB and Japan. The difference between now and previous is the cb's are out of bullets. Nobody knows how it'll unfold exactly. Look at the breakouts above long term resistance on a monthly level for clues. When govts can't borrow at any price the results are not pretty as contagion sets in like '08 equities and commods, it's almost automatic a 62% cut. This is only theory, however it won't resemble anything in our lifetime. Could be 1929 or 1800's when states last defaulted. Reply With Quote
    Aug 5, 2019 | 08:08 19 Expect lower interest rates with bond market problems?


    German 30-Year Bond Yields Goes Sub-Zero for First Time: Germany’s bond market is widely perceived as being one of the world’s safest as investors are lured in by the liquidity and credit quality offered. Now, the Euro area’s biggest economy joined Denmark and Switzerland in the region in offering negative returns to investors, taking the total stock of investment-grade debt yielding less than 0% to $14 trillion globally. I should mention, funds looking to extract a positive return from European sovereign assets have been forced further out the yield curve or into riskier debt markets such as Italy. I suspect this will most likely raise the probabilities of the next U.S. rate cut coming in September Reply With Quote
    Aug 7, 2019 | 01:10 20 There's a stampede for the lowest currency happening, China started talking of a 6.9 peg and market immediately went over 7. New Zealand has now cut 50bps and its currency dropped 1%, India cut 35bps, the Aud has dropped. Gold was over 1500 briefly tonight and USD is hanging right in there on top end of resistance. Either gold or USD is making a false move, i have my suspicions but will wait for confirmation. This is gonna get interesting Reply With Quote
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  • Aug 7, 2019 | 03:49 21 Was discussed on rural radio today at lunch time.

    Hmmm gold and agland both safe havens not sure about the second.

    Another commnet on same session was ag is first to go into recession/depression but always always first out.

    Just a opinion who knows but like errols posts better to have some knowledge on possible scenarios Reply With Quote
    Aug 7, 2019 | 07:09 22
    Quote Originally Posted by macdon02 View Post
    There's a stampede for the lowest currency happening, China started talking of a 6.9 peg and market immediately went over 7. New Zealand has now cut 50bps and its currency dropped 1%, India cut 35bps, the Aud has dropped. Gold was over 1500 briefly tonight and USD is hanging right in there on top end of resistance. Either gold or USD is making a false move, i have my suspicions but will wait for confirmation. This is gonna get interesting
    China has built an economy and Nation on their Chinese currency... bought US debt with US currency... obtained by sales of products bought...

    As long as there is production and trade... currency will be used for the exchange of these goods and services... the US $ is King so far...

    How does land here... in western Canada... over double in 5 years... when reported inflation is less than 2 percent...

    Yet wheat and Canola dropped in price.

    Farm equipment doubles... but what is it actually worth???

    China devalues its currency...

    What is something worth...? What the buyer will pay the seller for the product....in a currency payment that is trustworthy to be useful to the seller. Commodity Marketing no less... hence the need for futures and options...

    Trust... in the integrity of the currency... Reply With Quote
    Aug 7, 2019 | 07:18 23
    Quote Originally Posted by TOM4CWB View Post
    China has built an economy and Nation on their Chinese currency... bought US debt with US currency... obtained by sales of products bought...

    As long as there is production and trade... currency will be used for the exchange of these goods and services... the US $ is King so far...

    How does land here... in western Canada... over double in 5 years... when reported inflation is less than 2 percent...

    Yet wheat and Canola dropped in price.

    Farm equipment doubles... but what is it actually worth???

    China devalues its currency...

    What is something worth...? What the buyer will pay the seller for the product....in a currency payment that is trustworthy to be useful to the seller. Commodity Marketing no less... hence the need for futures and options...

    Trust... in the integrity of the currency...
    Tom

    I highlighted that one part ...you could also say " ..what the buyer is forced to pay from the seller for the product.." Because how does a combine become worth 750000 dollars...protected territories etc...

    And then it goes back to the value of grain and land in relation to everything coming onto the farm...there is a disconnect.... Reply With Quote
    Aug 12, 2019 | 23:21 24

    Looks like the IMF wants to make "Deep interest rate cuts". Checkout the part on paper currency not having a par value to electronic. Here's the link to the pdf.

    https://www.imf.org/en/Publications/WP/Issues/2019/04/29/Enabling-Deep-Negative-Rates-A-Guide-46598

    Are we ready for -10% or -15%? Save all your life and it looks like govt will take it to prevent recession. There might be no leaving the farm in the future if cash savings are going to be seized. This leaves a lot of questions moving forward because they are running on the same hypotheticals that was supposed to produce the opposite reaction of today. There's a lot of things we been told over the last 90 years that are going to turn into lies. Promises are going to be broken. Eliminating the concept of savings and positive interest rates will simply destroy govt programs as they rely not only on taxes but interest compounding like it did before 08. This is gonna be a bloody mess. Reply With Quote
    Aug 12, 2019 | 23:59 25
    Quote Originally Posted by macdon02 View Post
    Promises are going to be broken. Eliminating the concept of savings and positive interest rates will simply destroy govt programs as they rely not only on taxes but interest compounding like it did before 08. This is gonna be a bloody mess.
    This will most certainly blow up all of the pension funds, which were going to blow up anyways, just expedite the process. It has been so long since saving was the prudent thing to do, that soon no one will remember that it once was a rational thing to do. Reply With Quote
    Sep 6, 2019 | 08:54 26 And it begins . . . . governments will demand write-offs and clear bad loans from banks. Global commodities remain under intense selling pressure . . . .

    https://www.bloomberg.com/news/articles/2019-09-05/turkey-working-on-plan-to-clear-some-bad-energy-loans-from-banks Reply With Quote
    Sep 6, 2019 | 09:13 27
    Quote Originally Posted by errolanderson View Post
    And it begins . . . . governments will demand write-offs and clear bad loans from banks. Global commodities remain under intense selling pressure . . . .

    https://www.bloomberg.com/news/articles/2019-09-05/turkey-working-on-plan-to-clear-some-bad-energy-loans-from-banks
    It'll be interesting once it gets to Europe, the difference in 08 between how the FED and ECB handled the crisis, the Fed took all of Fanny and Freddies toxic assets immediately, whereas the ECB left them in the banks. So the French banks, a huge lender into the energy sector, and Deutsch and Commerz are loaded to the gills with NPL's. I suspect when it hits those, if not slightly before, contagion sets in around the world as traders hunt for the next Big Short. Interesting to note, Richardson just completed the first blockchain transaction for grain with Bangladesh. I believe this is being done to limit the risk with letters of credit in the transaction.. stay tuned. Reply With Quote
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  • Sep 9, 2019 | 06:21 28 2020 may welcome in much greater volatility and risk to the investor, particularly for global equities. There is the potential for supply shocks, the uncertainly of the ongoing U.S. trade war, unproductive debt and certainly the mess in Europe are all ignition points for volatility. Now stir-in, the U.S. election . . . .

    But today, equity markets continue to parade as if nothing is wrong. A clique, but a perfect storm (IMO). Reply With Quote
    Sep 9, 2019 | 14:27 29 Haven't we already seen inflation in housing, agricultural land and the equity markets? That's what low interest rates have already done. Negative interest rates might give a little bounce. Negative interest rates indicate an economy on life support. Most life support cases don't recover. Then you'll have deflation. Reply With Quote