THE PERFECT STORM: WILL SILVER AND GOLD SHORT SQUEEZE COLLAPSE THE BOND MARKET?

In October of 2013, I wrote an article titled, “Gold Market Sunk to Keep Bond Market Afloat” [1], in this article I made the argument gold and especially silver prices are being violently manipulated and held below free market dollar prices in order to sustain and prolong the collapse of the US Bond market.

The United States Bond market, in my estimation, is the largest bubble, in terms of nominal dollar value, and the most defended ponzi scheme, in terms of wealth squandered to sustain prices, in recorded history.

In recent days, there has been much excitement in the gold and silver markets regarding a possible short squeeze in progress dramatically raising paper market silver and gold prices. [2]

The price of silver has increased by $2.00 since the June 1 representing more than a 10% increase in the price of silver in 20 days. The same situation in gold with gold rising roughly $70 per ounce since June 1 translating into nearly a 6% increase in price.

The price of silver is the most defended asset price on the earth, with as much as $5 Trillion dollars of silver related derivatives being created to defend and maintain an unnatural and absurdly low price for the silver metal. [2]

Bond Bubble the Last Support for American Financial System

The price of silver must be defended and maintained at the lowest possible price so that the US Bond bubble can remain inflated.

The nearly $37 trillion dollar US Bond market is 29% Treasury bonds of which 60% are 10 year or less notes. The Treasury market is the life blood of the US financial ponzi scheme, the primary source of cash used to make payments on debts and continue to fund ever increasing government spending.

The remaining bulk of the $37 trillion is in Mortgage and Corporate Bonds representing the financial wealth of the entire United States GDP.

Rising interest rates in short term bonds will instantly cripple the Federal Government’s ability to make interest payments on debt that has risen from $2.54 Trillion in 1980 to $37.46 Trillion in 2014, a 1400% increase in 34 years (not inflation adjusted).

Even a small increase in 10 year treasury yields would set into motion a crippling credit crunch as the federal government scrambled to find and create dollars to make interest payments. Increasing Treasury rates cause rising rates in adjustable rate mortgages and signal increases in corporate debt borrowing costs, all of which would exacerbate and accelerate an evolving catastrophic credit crunch.

Silver and Gold and Oil Oh My

As can be seen in the chart below the 10 year yield has risen 24 bases points since June 1 with yields now at 2.64% up from just under 2.4% on June 1, 2014, representing a 10% increase in yield.

During the same period Silver has increased 10% and gold just under 5%. 

My Full Article is here : The Perfect Storm..

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