BOND MARKET UNBONDING

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When the market for a particular government bond collapses, be it within its own jurisdiction, or out there in the global open market, it means the state issuing the bonds is as good as dead, so to speak. Domestic bond market collapse is quite rare, as the state can usually print enough money to pay its obligations, of course, this operation has other side effects, like hyperinflation and so on. Default in the international bond market, however, is a different animal altogether. In almost all defaulting cases, there are, a priori, telltale signs to indicate the country might not be able to meet its international obligations. Usually when a country gets in trouble, it contacts the IMF (International Monetary Fund). Countries in the periphery are always under the auspices of the IMF (and other external institutions) as they are not financially sovereign. These countries are usually not allowed to issue bonds on the international market!
The core countries of the system, specially the US, influence the decisions of global financial institutions, particularly the multilateral ones like the IMF and the World Bank. The stringent requirements (of the multilateral institutions), be they for issuance of international bonds or direct/indirect loans, can be waived for certain favored nations. For example, Argentina was recently given massive loans from the multilateral institutions, even though the country was on the verge of default. Argentina has defaulted twice (on its international bonds) since the beginning of this century. No matter! Generally speaking, sovereign defaults are quite rare, as countries in troubled waters usually renegotiate (with the help/cajoling of the IMF) the terms and conditions of their bonds or loans with creditors, be they state, multilateral or private. IMF is the leading global institution that is mandated to safe guard the ‘smooth’ operations of the global monetary system. Hence, the IMF is more than willing to take harsh measures, particularly against those peripheral states, before things get out of hand. Be that as it may and in the scheme of global monetary regime, the thorny question still remains; what happens when some of the major core countries get in trouble? One must take due cognizant that at the end of the day, all debts, private or otherwise, are ultimately backstopped by sovereign states or more appropriately by nation-states!
The bond market is a debt market for the big players, i.e., transnational capital and sovereign states. When things go haywire in the government bond market, it signals serious trouble. After all, when a sovereign state defaults on its bonds, it means it might not pay its police force, military, teachers, doctors, etc. It cannot smoothly buy and sale goods. Pensions cannot be paid to retirees. Planes cannot fly, ships cannot sail, trains cannot roll, running water might not be available, electricity, satellite communication might be disrupted, etc., etc.! We assume you got the drift. In short, the bond market is the real engine that moves the whole global economy, albeit quietly. When there is a crisis in the bond market, every entity that matters gets involved, with the objective of salvaging the situation before contagion takes the lead. It is during such crises in the wider bond market the world witnesses the most ridiculous amount of printed money being injected into the world system. ‘Whatever it takes’ was what the ECB head once said, when the yields on the bonds of the ‘club med’ (Spain, Italy, Portugal, etc.) started to skyrocket (@ 7%)! Don’t forget; many of these core countries have outstanding bonds/debts (on the open market) to the tune of trillions of USD! Even a 1% rise in yield/interest on their bonds can cause havoc to the country’s economic situation. However, the system is set up in such a way as to allow these countries to rollover their bonds on maturity. They only pay interests/yields on their outstanding bonds. Therefore, it is only in rare occasions the global bond market exhibits tendencies that are out of the ordinary. Unbeknownst to many, this is exactly what happened in August of 2019!.
In the summer of 2019, the US repo market literally froze. The repo market is a market where large scale borrowers (usually hedge funds, investment banks, etc.) access quick cash from large scale lenders (financial entities, such as mutual funds, etc.) by depositing their US treasuries (bills/bonds) as collateral for a nominal rate of interest. Repo is almost always a short-term financial transaction (overnight) between borrowers and lenders that reside in the world of high finance. Technically speaking, the US repo market is broad, deep and liquid. The daily transaction of the US repo market is in the trillions of USD. As we said, interest rates in the repo market are usually nominal, but in August of 2019, the rate rose to about 10%. This was unprecedented! Unlike the fleeting and noisy stock market, the bond market is not only huge, but is also dead serious and meticulous in its operation to the point of being boring! What happened in August 2019 in the US repo market freaked out the world of finance and led to a pandemonium, which of course was not visible to the global sheeple (human mass). Now comes the trillion dollars question; is this the economic pandemonium that actually forced the microbe plandemic on global humanity?
Assuming the affirmative and speaking pragmatically, the global lockdown might well have been necessary to bring the accelerating catastrophic collapse of the world system (economic/financial/commercial/social/cultural…) to a more ‘orderly unraveling’! Again, the fake stock market (pumped up by the major global central banks) completely detached from reality, might also be another of the tricks employed by the establishment to gradually introduce the magnitude of the disaster to the unsuspecting parasitic elites. To be sure, the ‘orderly unraveling’ of the stock market is yet to come! Given the freezing of the US repo market and other indicators, the old printing tactic might not do the trick this time around. After all, ‘printing money out of thin air does not increase wealth, it only increases claims on existing wealth’ (Charles Hugh Smith). See his article next column and others on pages 28 & 30. In other words, printing is always inflationary as it water downs purchasing power affecting, for the most part, the working stiff/multitudes. Printing also causes inflation in the various asset classes, from rare paintings, to real estate…, as the phony money is directed towards the connected. Here is how a printer, aka a central banker, put it. ‘We make money the old-fashioned way. We print it.’ Art Rolnick, chief economist for the Minneapolis Fed!
Here is a more sinister worldview that might well be the major operating principle behind the prevailing global pandemic regime. “The individual is handicapped by coming face to face with a conspiracy so monstrous he cannot believe it exists.” J. Edgar Hoover, the first director of the FBI. Good day!