GERMAN BOND AUCTION FAILS
January 13th, 2009I haven’t gotten around to writing my 2009-year-ahead post. In the interim, here’s what I wrote to a core Cryptogon supporter a few days ago:
The phase we’re into now is akin to a car on an icy road that’s gone
into a turn too fast. We’re in the “Oh shit” stage of the wreck. Try as
we might, we spin the wheel but we just keep sliding toward the cliff.
Where are any of the paper currencies without the U.S.? The world is in
very deep shit. I can’t see how anyone is going to make it through this
without getting bloody.
China is in incredibly deep shit. Americans are tapped out.
I expect, (I’ll be writing about this soon), some kind of wildcard event
in 2009 that will cause the elite to move to the next phase. What I mean
is, fewer national currencies. Some drastic emergency measures.
Something radically different to deal with the deepening crisis.
When I say wildcard, it means: I HAVE NO IDEA WHAT IS GOING TO HAPPEN. No idea. I’ve reached a point where it’s incredibly difficult for me to forecast with much accuracy because the tools and assumptions I’ve been relying upon assume a functioning system. Even if that system was based on a bunch of fallacies, everyone agreed that the fallacies were not too problematic and went about their day.
We’re at the point where the Ponzi scheme just can’t perpetuate itself forward anymore because the endemic fallacies are blowing up in our faces.
Via: Financial Times:
A German sovereign bond auction failed on Wednesday as investors shunned one of the most liquid and safe assets in the world in a warning for governments seeking to raise record amounts of debt to stimulate slowing economies.
The fate of the first eurozone bond auction of 2009 signals trouble ahead as governments around the world hope to issue an estimated $3,000bn in debt this year, three times more than in 2008.
The 10-year bonds failed to attract enough bids to reach the €6bn the German government wanted. Bids of €5.24bn, a cover of only 87 per cent, amounted to the second worst auction on record in terms of demand.
Such developments were rare before the credit crisis. Before the seven German bond auctions that failed last year, the last German bond auction to fail was in July 2000 after the dotcom crash.
Analysts said the vast amount of supply is deterring investors and a growing number of countries, including those with deep and mature bond markets, such as Germany, the UK and Italy, are struggling to attract buyers.
The Netherlands has seen bond auctions fail, the UK and Italy have been forced to offer investors higher yields to meet their auction targets, while Spain and Belgium have cancelled offerings because of a lack of demand.
The German finance agency admitted that investor appetite for government debt had waned, although insisted the auction was “not a disappointment”.
Meyrick Chapman, a UBS fixed-income strategist, said when a German bond auction failed it “does suggest there may be trouble ahead for other governments wanting to raise money in the debt markets. Before the financial crisis, German bond auctions just did not fail.”
However, analysts stress the heavy supply is being offset by fears of deflation and recession, which are typically supportive to government bonds and have depressed yields, which have an inverse relationship with price, to historical lows.
The UK on Wednesday successfully sold £2bn in gilts due to mature in 2038. But Robert Stheeman, chief executive of the UK Debt Management Office, has warned that the large supply of debt could deter buyers of gilts. Britain is planning to raise £146.4bn in bonds this financial year – three times more than last year.
Research Credit: JL
Hi Kevin.
Interestin times, indeed.
On some levels, it is almost good to finally see this happen: for years, it was if I were alive in a nightmare. Well, now they are awake. It is as if the entire matrix were forced to swallow the red pill, all at once.
as for what’s coming, well, I think we are going to Nuclear Feudalism.
It took Europe 100 years to recover after the plagues. It is my sincere hope that we will recover sooner.
fiat lux.
C
“almost good”
…this is about as far from good as you can get, and still see it.
“What I mean is, fewer national currencies. Some drastic emergency measures. Something radically different to deal with the deepening crisis.”
On the first, you´re absolutely right. There needs to be a more consolidated currency set to minimize speculative friction in the floating exchange rates. I noted this recently regarding moves with the Yuan: http://kingludic.blogspot.com/2009/01/china-shoring-up-for-regional-currency.html
Then these shiny mk.II currencies will be flooding commodities and renewable-energy backed securities. Apply fascism liberally where there is friction, legally penalize “rogue” market participants profiting from the chaos, try to consolidate the distribution of gold volume. Volume on gold is really the key, people just holding gold in their floorboards don´t really figure it, and the price will obviously revalue upward and fall into crazy volatility within the new, higher range. The point is to control the trading capacity so that the gold can be used for collateral for funny money instruments like SDRs, where the trading capacity can then be leveraged into speculative fun time while the infrastructure for a new age is layed down and its equity is split amongst the creditors.
It might get real ugly, for a lot of people (including myself and millions like me — American middle class, dependent on the Machine to make a living), but the longer it takes to break, the uglier the breaking will be. And I think it needs to break. There is no rule by the People, and freedom has been boiled down to the freedom to buy this brand or that brand of material item, or to bitch about your government, as long as you don’t actually try and change that government. (“You are free to work from within to change the government as much as you like!” — good luck with that.)
Today’s testament to craziness:
Dollar gains vs. rivals after dismal retail sales data
http://www.marketwatch.com/news/story/Dollar-gains-vs-rivals-after/story.aspx?guid={C856BB6C-87E6-4491-8EDD-EF99B8EDBFAC}&dist=hplatest
despite
Retail sales plunge 2.7% in December
http://www.marketwatch.com/news/story/Retail-sales-plunge-27-December/story.aspx?guid={215B47D0-05C6-4972-93CE-0B11D3A92D3E}&dist=hplatest
And yeah, I know, it’s because no one knows where else to put their money. But still, it’s like saying, “Sure, it was struck by an iceberg, and it’s taking on water BIG TIME, and it’s probably going to sink… BUT IT’S THE BIGGEST SHIP ON THE OCEAN! Two tickets, please!”
German Marks required to buy one ounce of gold.
Jan 1919 170.00
Sept 1919 499.00
Jan 1920 1,340.00
Brief period of deflation
Sept 1920 1,201.00
Where the {hyper} inflationists think we are now.
Jan 1921 1,349.00
Sept 1921 2,175.00
Jan 1922 3,976.00
Sept 1922 30,381.00
Jan 1923 372,477.00
Sept 1923 269,439,000.00
Oct 2, 1923 6,631,749,000.00
Oct 9, 1923 24,868,950,000.00
Oct 16, 1923 84,969,072,000.00
Oct 23, 1923 1,160,552,882,000.00
Oct 30, 1923 1,347,070,000,000.00
Nov 5, 1923 8,700,000,000,000.00
Nov 30, 1923 87,000,000,000,000.00
Where the {hyper} deflationists think we are now.