Creditors Finally Wake Up To An Apocalyptic Reality: Bond Losses As High As 99%

[MRM]

I think that's the point that both classical economic theory and MMT miss. The currency will have value for as long as the market has confidence in the economy. If the market has confidence, it doesn't matter how much money the government prints. If the market loses confidence, it doesn't matter how much contraction the government attempts, no one wants the currency. The government can get away with printing infinite money until it can't. The difference is that it is easier for the market to lose confidence if it sees large debts as unsustainable. And if the market starts to lose confidence, it is harder to recover if the government has huge debt and causes a bigger crash if it can't.

[RWebb]

here is a primer for those wondering what we are talking about:

https://en.wikipedia.org/wiki/Modern_Monetary_Theory

[sugarwood]

Originally Posted by Mad Max

Well, on December 23, 1913, that system was destroyed by a private banking cartel

In other words, nutcases have been calling for the end of the financial system for 107 years, and counting.

[sugarwood]

Originally Posted by MRM

You have to read Zero Hedge with a critical eye. It is a Russian propaganda organ

Zero Hedge has been calling for collapse for 11 years.
The author was busted for insider trading, banned from the industry, and now its a desperate clickbait farm.

Russian? The dude lives in New Jersey.
https://en.wikipedia.org/wiki/Daniel_Ivandjiiski

[jyl]

Originally Posted by MRM

I think that's the point that both classical economic theory and MMT miss. The currency will have value for as long as the market has confidence in the economy. If the market has confidence, it doesn't matter how much money the government prints. If the market loses confidence, it doesn't matter how much contraction the government attempts, no one wants the currency. The government can get away with printing infinite money until it can't. The difference is that it is easier for the market to lose confidence if it sees large debts as unsustainable. And if the market starts to lose confidence, it is harder to recover if the government has huge debt and causes a bigger crash if it can't.

I imagine there’s variants of MMT. 1) is where the government “prints” by issuing and selling debt (Treasuries) to the private market (investors, banks, etc), 2) is where it prints by simply, well, adding zeroes to an electronic ledger.

We’ve sort of stumbled into a hybrid 3) where one arm of the government issues and sells Treasuries and another arm adds zeroes to its ledger and buys Treasuries.

Wait, that’s not actually new. I didn’t realize that the pct of Treasuries held by the Federal Reserve today is not actually the highest ever. Check out https://www.yardeni.com/pub/foftreadebt.pdf

[Skillet83]

Originally Posted by MRM

Rational discussion is unlikely to change any minds, but I feel compelled to give it a try anyway.

The article is talking about the returns bondholders are seeing these days when the company goes bankrupt, not the returns on investment grade bonds. It's not exactly shocking that the bond holders lose their investment when the company goes bankrupt. The company wouldn't go bankrupt if it could pay its bondholders. The point of the article is nothing more that when there is cheap credit and investors are chasing yield, some of those willing to take risks on junk bonds end up with little to nothing on their investment.

You have to read Zero Hedge with a critical eye. It is a Russian propaganda organ that publishes just enough real news to stay credible to the credulous while pursuing its real mission of spreading doom and gloom conspiracy theories to weaken the social fabric of America and further the Motherland's interests. The more people read articles like this and post threads the the OP, the less credible America's institutions appear and the better off America's foreign adversaries are. Next time you read an article about an upcoming oil shock or crash in the auto industry, remember that Russia is one of the world's largest oil exporters. When you read articles about how unstable the US Dollar or how close we are to economic collapse, remember how low Russia's foreign currencies are (and that oil is priced in Dollars).

There are plenty of reasons to question the government's free spending policies and fear the adverse consequences of artificially low interest rates, but none of those reasons are found in Zero Hedge's articles and the "solutions" offered are conveniently counterproductive to the US economy and would benefit its adversaries. And as a double whammy, wacky conspiracy theories about the Fed destroy the credibility of serious thinkers who legitimately question Fed policy. The crazier Zero Hedge can convince fiscal conservatives to act, the more they discredit the entire conservative monetary movement.

By the way, if the Fed was so powerful, how come it hasn't been able to manufacture even its stated goal of 2.5% inflation?

"It is a Russian propaganda organ that publishes just enough real news to stay credible to the credulous"

Dude, it is owned by CBS, says so at the bottom of their page. I am not a fan of the main stream media (fake news) but think Russian propaganda is a little far. Well, considering our media today, maybe not. S

[MRM]

It is owned by ABC Media Limited, not CBS. But this ABC Media is a Bulgarian corporation, not the American Broadcasting Company, which is owned by Disney.

Zerohedge is a Russian propaganda organ designed to discredit US institutions and fray the social fabric of the nation.

[group911@aol.co]

Always amazing how little effort it takes to find the truth but how few people take even that little effort to do so. What mindset do you suppose it takes to get in that groove?

Originally Posted by MRM

It is owned by ABC Media Limited, not CBS. But this ABC Media is a Bulgarian corporation, not the American Broadcasting Company, which is owned by Disney.

Zerohedge is a Russian propaganda organ designed to discredit US institutions and fray the social fabric of the nation.

[jyl]

Originally Posted by group911@aol.co

Always amazing how little effort it takes to find the truth but how few people take even that little effort to do so. What mindset do you suppose it takes to get in that groove?

The internet makes it easy to exploit people who don’t think hard?

[group911@aol.co]

That doesn't really explain the whole thing. It also makes it easy to search for the truth. There's something that's taken away the normal need for facts that we used to associate with cults except that back then, the cults usually isolated their followers and fed them news. Now, not so much.

Originally Posted by jyl

The internet makes it easy to exploit people who don’t think hard?

[jyl]

Originally Posted by group911@aol.co

That doesn't really explain the whole thing. It also makes it easy to search for the truth. There's something that's taken away the normal need for facts that we used to associate with cults except that back then, the cults usually isolated their followers and fed them news. Now, not so much.

It makes it easy to search for, and be fed, information. But the individual still has to distinguish information from disinformation to find the truth. Many are unable to do that, and many more don’t actually care to do so.