Submitted by Chris Hamilton,

What do Sovereign bond interest rates represent???

If I knew nothing about the growth, the debt, the inflation, the exporters vs. importers, the serial defaulters, currency manipulators, hot-money or conversely deflation fighters, etc. etc. and simply grouped the nations of the world by interest rates paid on 1yr and 10yr sovereign debt…well I’d get a funny feeling the rates paid have a stronger correlation to the relationship of the nations to the US than any other variable.  I’d wonder if your status with the central bank cabal was more important than your ability to repay the loaned money?  Luckily I know better!

Some very notable rates…

  • PIIGS are amazing and now thanks to the EU’s LTRO are dirt cheap…(PIIGS 1yr / 10yr yields)= Portugal 0.05% / 3.75% , Ireland 0.12% / 2.18%, Italy 0.27% / 2.74%, Greece 2% / 6.3%, Spain 0.13% / 2.50%…Serial defaulters need not pay more for lending ever again!?!
  • Italy with the world’s 3rd largest aggregate debt, no growth, and no enforceable tax laws have blended rates that are ludicrous and indicative of institutional fraud…in fact, that can be said of nearly all these rates.
  • Australia and New Zealand are the only “outliers” paying up on yields and generally sitting in the wrong classifications.

1 yr interest rates

US Pals and/or “deflation-istas”:

Belgium 0.02%, France 0.024%, Netherlands 0.03%, Germany 0.036%, Switzerland 0.05%, Japan 0.055%, Czech Rep 0.09%, US 0.09%, Ireland 0.12%, Spain 0.13%, Hong Kong 0.14%, Sweden 0.25% Denmark 0.25%, Italy 0.27%, Latvia/Lithuania 0.3%, Singapore .0.35%, UK 0.41%, Portugal 0.5%, Israel 0.53%, Taiwan 0.6%, Austria 0.7%, Qatar 0.7%, Canada 1%, Saudi Arabia 1%, Bulgaria 1.26%, Norway 1.33%,

US “fence sitters”:

Hungary 1.98%, Greece 2%, Philippines 2.07%, Thailand 2.14%, Poland 2.31%, S. Korea 2.37%, Australia 2.5%

US naughty list and/or importers of US inflation:

Mexico 3%, Chile 3.1%, Malaysia 3.3%, China 3.74%, New Zealand 3.9%, Vietnam 4.6%, Colombia 5%, Iceland 5%, S. Africa 6%, Sri Lanka 6.4%, Indonesia 7.25%, Russia 8.6%, India 8.7%, Venezuela 9.7%, Turkey 9.75%, Pakistan 10.1%, Kenya 10.27%, Brazil 11.2%, Egypt 12.2%, Argentina ???, Ukraine 20%

10 yr interest rate

US Buds and/or “deflation-istas”:

Switzerland 0.44%, Japan 0.51%, Germany 1.06%, Finland 1.23%, Netherlands 1.26%, Austria 1.34%, Denmark 1.42%, Czech Rep 1.45%, France 1.46%, Belgium 1.47%, Taiwan 1.59%, Sweden 1.62%, Hong Kong 2.02%, Canada 2.09%, Ireland 2.18%, Norway 2.35%, Singapore 2.38%, US 2.43%, UK 2.49%, Spain 2.50%, Latvia/Lithuania 2.6%, Israel 2.72%, Italy 2.74%, Qatar 3.04%,  S. Korea 3.06%, Poland 3.37%, Australia 3.40%, Portugal 3.75%

US “fence sitters”:

Thailand 3.4%, Bulgaria 3.5%, Malaysia 3.89%, New Zealand 4.2%, Philippines 4.33%

US “haters” and/or importers of US inflation:

Chile 4.24%, China 4.3%, Hungary 5.07%, Peru 5.2%, Mexico 5.71%, Greece 6.3%, Colombia 6.66%, Iceland 7.28%, Sri Lanka 7.5%, S. Africa 8.14%, Vietnam 8.21%, Indonesia 8.25%, India 8.85%, Argentina 9%?, Turkey 9.32%, Russia 9.38%, Venezuela 11.7%, Brazil 11.97%, Kenya 12.1%, Pakistan 13.2%, Egypt 15.9%

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Extra credit:

1 mo interest rates

Germany  <-0.025%>, Switzerland <-0.015%>, France 0.008%, US 0.03% (US was 5.22% in Feb ’07), UK 0.031%, Russia 9.55% – but these rates are only for central banker pals worldwide…

Consumer Rates

While consumer rates in America for non-bankers are a little higher…

  • Credit card rates are a minimum of 10.5% easily up to 30%
  • Auto loan (60mo, new car) @ 3.2%
  • Mortgage (30yr fix) @ 4.3%
  • Stafford student loan @ 4.66%

And poor, poor savers…not quite keeping up with inflation (somewhere between 2% and 10%…like the Fed you can pick the rate that suits you best)…

  • 1yr CD @ 0.6%
  • Savings accounts @ 0.1% – 0.3%

So does that mean that US savers and credit card spenders are 'friend' or 'foe'?

 

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Original source at: zero hedge - on a long enough timeline, the survival rate for everyone drops to zero | http://www.zerohedge.com/news/2014-08-12/how-value-sovereign-bonds-2-words-us-friend-or-foe

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Inflation is hot property today, hyperinflation is even hotter! We think we are modern, contemporary, smart and ready to deal with anything. We’ve got that seen-it-all-before, been-there-done-it attitude. But, we are not a patch on what some countries have been through in the worst cases of hyperinflation in history. Here’s the top 10 list of worst cases in history. We’ll start with the worst first…let’s think positive!

Hungary 1946

Inflation at its peak reached a staggering figure of 13.6 quadrillion % per month! That’s 13, 600, 000, 000, 000, 000%. The largest denomination bill was a 100 Quintillion note. Prices ended up doubling every 15 hours at the time.

Zimbabwe 2008

Prices doubled here every 24.7 hours in November 2008 and inflation reached levels of 79 billion-odd %. They eventually stopped using the official currency and switched to the South African Rand or the $US. A loaf of bread ended up costing $35 million. This is the most recent case. It was Mugabe’s land-redistribution program that caused this.

Yugoslavia 1994

In just the one month of January 1994 inflation rose by 313 million %. Prices doubled every 34 hours (which is nothing compared to Hungary). The currency ended up getting revalued 5 times in all between 1993 and 1995, all to no avail. The cause? A recession triggered by overseas borrowing and an on-going political struggle in the 1980s and the following decade.

Germany 1923

Adolf Hitler rose to power as a consequence of hyperinflationary pressure (at least one of the reasons). Prices doubled every 3.7 days and inflation stood at 29, 500%. Germany was crippled with the reparation payments after the Treaty of Versailles and the end of World War I.

Greece 1944

Prices started rising by 13, 800% in October 1944 and they doubled every 4.3 days. The trouble was the debt incurred by World War II.

Poland 1921

Prices rose in 1921 by 251 times in comparison with those of 1914. They doubled every 19.5 days. The Zloty was introduced as the new currency in 1924 in an attempt to start afresh. Inflation stood at 988, 233% in 1924.

Mexico 1982

Mexico had a rate of inflation of 10, 000% in 1982 (due mainly to too much social expenditure).

Brazil 1994

Inflation was 2, 075.8% at its worst in 1994. The Real was adopted in 1994 and it managed to calm inflation down.

Argentina 1981

The highest denomination bill was the one million pesos note. The Peso was revalued three times.

Taiwan 1949

This was a knock-on effect from China and the Chinese Civil War. The New Taiwan Dollar was issued in June 1949. The monthly rate of inflation stood at 399%

Inflation can be creeping (mild or moderate inflation) or galloping. We can talk of Hyperinflation and stagflation (inflation and recession). Deflation is not better. We have so many names for it.

Hyperinflation means prices doubling in such a short space of time that we can’t keep up with it all. Hyperinflation comes about at times of trouble, war, conflict, upheaval, change on unprecedented levels. It comes about because we still haven’t learnt how to control it. History repeats itself, we hear people say. Thankfully, it doesn’t repeat itself too often. Fingers crossed.

Originally posted: Hyperinflation – 10 Worst Cases

You might also enjoy: Death of the Dollar | You’re Miserable USA! | Emerging Markets: Lock, Stock and Barrel | End of the Financial World 2014 |  Kristallnacht on Wall Street? Bull! | China’s Credit Crunch | Working for the Few | USA:The Land of the Not-So-Free  

 

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Original source at: zero hedge - on a long enough timeline, the survival rate for everyone drops to zero | http://www.zerohedge.com/contributed/2014-02-06/hyperinflation-%E2%80%93-10-worst-cases

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Worries of a Lehman-like financial crisis spreading through Europe and the world has made Greece talk of the market lately. Not to let Greece dominate the spotlight, the U.S. debt ceiling debate is also getting to be as traumatic since a failure to raise the debt ceiling could mean imminent default and credit downgrades for the United States sovereign debt.

In the midst of all these different crises, global markets rise and fall in lockstep with news coming out of Europe and the U.S. The U.S. stock market, after suffering a correction phase since April, snapped back last week, scored the best week in two years, but only to retreat again after the long July 4th weekend. The commodity and currency markets are not immune either, with investors switching back and forth between risk-on and risk-off trades.

In this environment, one has to ask … are there other indicators signaling a global market doomsday?

According to Oxford Analytica, there are 15 “Global Stress Points” ranging from medium to extreme high impact to the entire world. These are listed below ranked by their potential impact by Oxford (see graph). Around 60% of the “stress points” are related to geopolitics, war or unrest, while only about five events could be classified as financial crises.

  1. Dollar Collapse
  2. Taiwan / China Armed Hostility
  3. Israel / Iran Armed Conflict
  4. Mexico State Hollowing
  5. Global Protectionism
  6. Latin America Hydrocarbon Disruption
  7. Iraq State Institutions Collapse
  8. Russia Military Aggression
  9. End of Euro
  10. India / Pakistan War
  11. Pakistan State Collapse
  12. Argentina Sovereign Default 2.0
  13. North Korea Military Conflict
  14. War in North Africa
  15. Lebanon Civil War


(Click to enlarge) Chart Source: Oxford Analytica

For all the rage in the press, the euro’s demise is surprisingly not as big a deal as, for instance, China making good on its 60-year threat to Taiwan, or even a much more mundane “global protectionism.” And I hate to disappoint China Bears, but it looks whatever problems China has, it is not the one that will tank the world like the dollar and the euro.

Since a U.S. dollar collapse is ranked as the greatest risk to the world, and dollar’s fate is largely dependent on if the bond market has faith in Uncle Sam, it might be helpful to add five additional warning signs that the bond market is freaking out (see chart):

  • Prices of bonds maturing start falling (i.e., investors start to demand higher interest rates to hold U.S. government debt).
  • A narrower spread between rates on Treasury bills and other short-term credit or near substitutes, e.g. LIBOR – This would be a sign of waning faith in the U.S. government.
  • A narrower spread between Treasuries and near substitutes – A sign of falling creditworthiness of Uncle Sam.
  • Price spikes in U.S. CDS (credit default swaps, insuring against a U.S. debt default) – According to Markit, the most noticeable movement has occurred in 1-year spreads, which have converged closer to 5-year spreads, and is up about 430% since early April, while 5-year CDS also has risen about 46%.
  • Higher volatility in the U.S. bond market – Another sign of lost confidence from bond investors.


(Click to enlarge) Chart Source: The Washington Post

So far, out of the 20 signs, there’s one that’s sending up a red signal flare – U.S. sovereign debt CDS, which is directly linked to the dollar (see chart above).

The U.S. does not have control over many of the indicators listed here, but at least the No. 1 risk factor — the U.S. dollar — is influenced by the national debt and by the monetary and fiscal policies set by the U.S. government and the Federal Reserve.

The longer the debt ceiling debate lingers, the more likely the bond market would start reacting and demanding higher interest rates. A sovereign credit downgrade as a result of missing the debt ceiling deadline would just translate into billions more in interest payments, piling on to the existing debt.

The United States is not like Iceland or Argentina, resorting to default as retorted by some could mean calamity not only to its citizens, but also to the rest of the world. Unless the government and this Congress get their act together, there will be no bailout, and instead of one lost generation to the Great Recession, there could be multi-generation missed in the next Grand Depression.

EconMatters.com

 

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Original source at: zero hedge - on a long enough timeline, the survival rate for everyone drops to zero | http://www.zerohedge.com/article/20-warning-signs-global-doomsday

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