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Michael Pento: Catastrophic Bond Market Collapse Approaches! Gold Goes To All Time Highs If Fed Admits It Cannot Raise Rates

  • Michael Pento: Catastrophic Bond Market Collapse Approaches! Gold Goes To All Time Highs If Fed Admits It Cannot Raise Rates
    by Greg Hunter’s
    Money manager Michael Pento wrote a book a few years ago warning of “The Coming Bond Market Collapse.” All the signs say this calamity is very close. Pento explains, “Global central bank balance sheets have risen from $6 trillion in 2007 to $21 trillion today. That’s the increase in the size of central bank balance sheets. . . . I can prove to you when this bubble breaks,it’s going to be disastrous. . . . Just that they (European Central Bank-ECB) didn’t hint at expanding QE and look at what it has rendered us. That’s proof positive that everything that has happened since the 2008 collapse, that it’s just been artificial and ephemeral in nature. Once central banks even hint at pulling back from their QE programs and ZIRP and NERP go away, bonds will crash, and when those sovereign bonds crash on a global basis, it’s going to take everything else down with it concurrently.”

    What happens if the Fed raises interest rates, and what happens if it doesn’t? Pento contends, “If the Fed actually raises rates in this September meeting, I think what you saw last week and what you are experiencing this week is just the warm-up act. You are going to have a wipeout in bonds. Everybody is going to be rushing for the door at the same time, and there is no room but for one out of a thousand to get through. So, it’s going to be catastrophic.”

    How fast could interest rates rise, and how high could they go? Pento calculates, “What’s going to happen eventually is exponentially worse than what you saw last week and this week because eventually, they (central banks) are going to have to change their monetary policies. They (central banks) are going to have to, once their 2% inflation target is achieved, they are going to have to start unwinding their balance sheets. Otherwise, there is going to be no way to drain the money supply. They’re going to have to sell assets. Front runners that are front running the bids from central banks are going to have to get out. . . . So, yields are going to absolutely spike to at least where inflation is plus a percent or two. I am saying you can go from negative rates such as -.1% to 2% or 3% or to 4% in a matter of days. . . . When I say 2%, 3% or 4%, I am being generous. I think rates could spike dramatically, and the bond market is global in nature . . . . That’s going to spike all yields concurrently and in unison, and everything, Ferrari’s, diamonds, commodities, real estate investment trusts, municipal bonds, collateralized loan obligations, and I mean everything is priced off of that risk free rate of return. . . . If they are going to stop their repression of interest rates, everything is going to collapse concurrently.”

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September 16, 2016 - Posted by | Economics | , , , , , , , , , , , , , , , , , ,

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