The Spreading 'Bondfire' And The Rising Price Of Gold

Today’s rising interest rates and trillion-dollar losses in global bond markets are prelude to what is to come, i.e. rising inflation with higher interest rates ending in the bursting of the global government bond bubble and the long awaited breakout of gold.

Last year, on December 15, 2015, the Fed announced the first tentative rate increase in nearly ten years, from 0.0% to 0.25%. The Fed had last raised rates in June 2006, which eventually burst the US real estate bubble in 2007 resulting in the collapse of global markets in 2008.

In 2015, after a decade of unprecedented cheap money and virtually free credit to banks, Yellen’s Fed hoped economic conditions had finally stabilized and they could again charge commercial and investment banks interest, a nominal rate of only 0.25%, for their debt-based capital.

 On December 16th 2015, Bloomberg reported:

FED ENDS ZERO-RATE ERA: SIGNALS 4 QUARTER-POINT INCREASES IN 2016

The increase draws to a close an unprecedented period of record-low rates that were part of extraordinary and controversial Fed policies designed to stimulate the U.S. economy in the wake of the most devastating financial crisis since the Great Depression. The FOMC lowered its benchmark rate to near zero in December 2008, three months after the collapse of investment bank Lehman Brothers Holdings Inc.

                                                        Source: Trade Economics                                                

Because today’s overvalued stock prices are supported mainly by Fed liquidity and low central bank interest rates, investors feared that the higher interest rates would negatively impact stock prices. On January 1st, an article in Forbes asked, Will Rising US interest rates Crush Stock Markets?  The answer was “yes”.

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