{"id":6400,"date":"2015-03-11T05:21:34","date_gmt":"2015-03-11T10:21:34","guid":{"rendered":"http:\/\/olduvai.ca\/?p=6400"},"modified":"2015-03-11T05:21:34","modified_gmt":"2015-03-11T10:21:34","slug":"the-end-of-the-great-debt-cycle","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=6400","title":{"rendered":"The End of the Great Debt Cycle"},"content":{"rendered":"<h3 class=\"entry-title\"><a href=\"http:\/\/wolfstreet.com\/2015\/03\/10\/the-end-of-the-great-debt-cycle\/\" target=\"_blank\">The End of the Great Debt Cycle<\/a><\/h3>\n<p>\u201cIt\u2019s the end of the great debt cycle,\u201d says hedge fund manager Ray Dalio of Bridgewater Associates, taking the words out of our mouth.<\/p>\n<p>Bond fund manager Bill Gross adds context:<\/p>\n<blockquote><p>In the past 20 to 30 years, credit has grown to such an extreme globally that debt levels and the ability to service that debt are at risk. [\u2026] Why doesn\u2019t the debt supercycle keep expanding? Because there are limits.<\/p><\/blockquote>\n<p>Neither Mr. Dalio nor Mr. Gross nor we know precisely where those limits are. But the Europeans and the Japanese are rushing toward them.<\/p>\n<h2><strong>A Poke in the Eye for Lenders<\/strong><\/h2>\n<p>In Europe, bond yields are lower than they\u2019ve ever been. Between $2 trillion and $3 trillion in sovereign and corporate bonds now trade at negative nominal yields. We don\u2019t need to tell you that it is unnatural and perverse for lenders to accept a poke in the eye for giving up their valuable savings. But that\u2019s just part of the perversity of the present system \u2013 no real savings are involved. The money never existed in the first place. Getting a negative yield seems almost appropriate, if nevertheless incomprehensible.<\/p>\n<p>Today, banks create \u201cmoney\u201d from thin air, in the form of new deposits, when they make loans.<\/p>\n<p>As our friend Richard Duncan explains in his book\u00a0<em>The New Depression: The Breakdown of the Paper Money Economy<\/em>, by the turn of the new millennium the reserve requirement \u2013 whereby banks are forced to hold some cash or gold in reserve against new loans \u2013 was so low that it played \u201cpractically no role whatsoever in constraining credit creation.\u201d<\/p>\n<p>&nbsp;<\/p>\n<p>&#8230;click on the above link to read the rest of the article&#8230;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The End of the Great Debt Cycle \u201cIt\u2019s the end of the great debt cycle,\u201d says hedge fund manager Ray Dalio of Bridgewater Associates, taking the words out of our mouth. Bond fund manager Bill Gross adds context: In the past 20 to 30 years, credit has grown to such an extreme globally that debt [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[3186,124,195,4085,431,1768,1389,1940,1939],"class_list":["post-6400","post","type-post","status-publish","format-standard","hentry","category-economics","tag-bond-yields","tag-central-banks","tag-debt","tag-debt-cycle","tag-interest-rates","tag-negative-interest-rate-policy","tag-nirp","tag-zero-interest-rate-policy","tag-zirp"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/6400","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=6400"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/6400\/revisions"}],"predecessor-version":[{"id":6401,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/6400\/revisions\/6401"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=6400"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=6400"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=6400"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}