People ARE Shocked

The only reason the interest rates went up over the summer was because of the taper talk. But they didn�t actually taper and I didn�t expect them to and I honestly don�t see how they�re going to, maybe ever. So the rates went up, not only in the fundamentals but because of the talk of tapering.
People were shocked, they said, �Wait a second, you�re going to taper and do weak economic data? You�re going to taper into a recession?� Which is what they�re doing. But they didn�t taper, so now rates are coming back down again.

If we follow the Japan scenario, and I expect we will, I can see ten-year no-rates coming down to 80 basis points. If they go from 250 to 80, that�s the greatest bond market rally in history.

So everyone�s worried about the bond bubble, but they�re focused on nominal rates. They�re not looking at real rates. Nominal rates could come down a lot more as a way of getting real rates lower, because inflation is low it may even dip into deflation.
So we could be set up. But in the long run rates would go way up and the country would go bankrupt and we�ll all have hyper-inflation. That could be two or three or four years away. Over the course of the next year you can see a very strong bond market rally.

- Jim Rickards via Future Money Trends:

http://futuremoneytrends.com/blog/?p=10062

The FED is Going to Keep the Lid on Interest Rates

Every time the rates want to go up, the Fed can just buy more bonds. Of course, they buy bonds with printed money, but it just keeps the lid on rates.

I�ve spoken to people in the primary dealer community. They�re completely relaxed because they�re just middle-men; they�re intermediaries between the Fed and the banks; the institutional investors. They buy bonds from the Treasury, they can finance them or sell them to the Fed or they can sell them to institutions. So the primary dealer is basically the large banks are middle-men.

Now, the risk there is that they�ll get caught out. They�ve got long maturities, so they�ve got five-year notes or ten-year notes and they�re financing them overnight in the repo market. Well, what if the repo rate went up? All of a sudden the trade is profitable, it goes upside down, if the short-term rate gets above the long-term rate. Or if long-term rates go up they have capital losses on the bonds.
So it�s a very risky trade, but the Fed has told them, �We�ve got your back.� That�s what forward guidance is. When the Fed says �We�re not gonna raise rates for two years or three years, etc., then you can do the overnight financing for three years and know that you�re going to be paying zero rates.�

So they�ve taken the risks out of the trade. So the primary dealers are relaxed, the Fed is going to keep the lid on the interest rates.

- Source, Future Money Trends:

http://futuremoneytrends.com/blog/?p=10062

Depressions Are Structural Problems

People look at the system and they say that it really is not sustainable, it really is based on confidence, but we�re in the process of eroding confidence. There is no exit from quantitative easing. We should say there�s no good exit. You can back away from it, but then you�ll implode the economy in a deflationary crash.

Or you can keep going and eventually cause a loss of confidence in the dollar and then have a hyper-inflationary crash, so you got a crash either way. One looks like the Great Depression, one looks like the late �70s but worse. Those are the only two paths, but there�s no other path. There�s no way we can just sort of taper, reduce it, finesse it, try to get growth on a self-sustaining path.

The reason for that is we�re in a depression. And depressions are structural problems; they require structural solutions. You cannot use a liquidity solution for a structural problem. You need a structural solution.

- Jim Rickards via a recent Future Money Trends interview:

http://futuremoneytrends.com/blog/?p=10062

Jim Rickards - Currency War's Update

Jim Rickards is interviewed by Future Money Trends. Jim gives a status update on the ongoing currency war's and talks gold, silver, bitcoin and much more. Enjoy the interview!

- Source, Future Money Trends:

http://futuremoneytrends.com/blog/?p=10062