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Negative Interest Rates Put World On Course For Biggest Mass Default In History

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http://www.telegraph.co.uk/finance/comment/jeremy-warner/11569329/Jeremy-Warner-Negative-interest-rates-put-world-on-course-for-biggest-mass-default-in-history.html

Here’s an astonishing statistic; more than 30pc of all government debt in the eurozone – around €2 trillion of securities in total – is trading on a negative interest rate.

With the advent of European Central Bank quantitative easing, what began four months ago when 10-year Swiss yields turned negative for the first time has snowballed into a veritable avalanche of negative rates across European government bond markets. In the hunt for apparently “safe assets”, investors have thrown caution to the wind, and collectively determined to pay governments for the privilege of lending to them.

On a country by country basis, the statistics are even more startling. According to investment bank Jefferies, some 70pc of all German bunds now trade on a negative yield. In France, it's 50pc, and even in Spain, which was widely thought insolvent only a few years ago, it's 17pc.

Not only has this never happened before on such a scale, but it marks a scarcely believable turnaround on the situation at the height of the eurozone crisis just a little while back, when some European bond markets traded on yields that reflected the very real possibility of default. Yet far from being a welcome sign of returning economic confidence, this almost surreal state of affairs actually signals the very reverse. How did we get here, and what does it mean for the future? Whichever way you come at it, the answer to this second question is not good, not good at all.

public_private_deb_3284098a.PNG

There is clear divergence on Eurozone bonds especially if you compare German negative and Greek in double figures. I'm not sure how multiples work when one of the number is negative, anyone any ideas?

Secondly this chart is quite incredible (Public and private debt in advanced economies since 1970: Source Longview Economics) the peak of private debt wasn't in fact during the "the great depression" but just as WW1 started. I've heard Richard Werner state that just prior to WWI starting the UK was having a banking crisis anyone know what was happening in the banking system at this point. He states that the BoE had to rescue the system, which was essential because of the war.

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Interesting article.

Regarding the 2nd chart in the article (the chart above). The telegraph constantly publishes charts that stop in 2010 the year of the last general election - as if there's something to hide from 2010 to 2015.

Edited by billybong

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Interesting article.

Regarding the 2nd chart in the article (the chart above). The telegraph constantly publishes charts that stop in 2010 the year of the last general election - as if there's something to hide from 2010 to 2015.

Ha, of course they do! Lest the truth of Gidiot's 'recovery plan' is exposed. It's also somewhat misleading to aggregate debt in that way since the economic cycles of nations are never perfectly synchronous.

Steve Keen's corrected chart of US debt/GDP (below) illustrates that both the Great Depression and the Great Recession occurred when US private sector debt hit ~175% of GDP. The subsequent spike to 240% of GDP in 1932 was a consequence of the slump in current prices that took place during 1930 and 1931.

071413_1432_IsayTomatOh5.png

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For the Torygraph the comments are more interesting than the article.

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What ever it is they are attempting to hide? Their intention. The present coarse must be deliberate, we are where they want us to be. I don't believe this simple people getting caught out. The system is being run into the ground deliberately.

More up to date charts would probably show that things are getting worse much worse.

Also the Gov say one thing and does the other.

Almost certainly the graph would show that the government is doing a bad job.

If it's bad just don't print it. There is limit to how much untruth you can print and still be in business as a "news paper?"

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