Bond Market to the U.S.: You're No Different Than Anyone Else

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Includes: BND, SHY, TLT
by: The Housing Time Bomb

It looks like the Greeks decided to not be upstaged by Italy:

My Take:

Nothing like seeing angry mobs trying to light cops on fire. How long can this last until the police say "F" this and join the other side.

Folks, take it all in because you are going to see a replay of this over here. I say this because the
US is in the same fiscal shape as Greece.

The images above are horrifying and it's only going to get worse. This is what happens when your debt levels can no longer be sustained, and you must slash the cost of government via austerity in an attempt to stay solvent.

The problem we have is the people in the world today are soft and have no idea what it's like to experience real hard times. Go watch a few clips from WWII or the Great Depression if you want to see what it's like to really struggle in order to survive.

As a result, citizens like the Greeks are completely unprepared when the government stops writing checks when they run out of ways to borrow more money.

The bottom line here is reality is beginning to set in and they don't like it. The people of Greece are now broke and jobless, and the government has no money or answers for them. This is not an acceptable answer for it's citizens so they turn to violence and upheavel as they become enraged with the situation over time.

Things is only going to get worse as people become more desperate. If I was a politician over there I would be strongly considering getting the hell out of dodge before getting bloodied like the stooge at the end of the video above.

I know if I lived in Greece and had money I would getting out of there because inevitably people will start stealing from others in order to survive. Think about it: What other options do people have when there are no jobs and no future?

Some advice:

Before you go spend your last $2000 on a 50" HDTV I suggest you reconsider unless you have at least 6 months of cash in the bank.

In case you missed the move in bonds, we are now seeing something similiar to what Greece saw a year ago in their own debt markets. Take a look at the 10 year:

Now take a look at the 10 year since the Fed decided to QE in early November:


The Bottom Line:

Are we officially Greece yet? No, but we are well on our way if we don't dramatically change our government spending.

Greek 10 year bonds got up to around 9% yield before all hell broke loose in their debt markets. How did they get there? Just like we did by spending.

Remember folks, the path to insolvency does not matter. We got here by bailing out the rich and hiding our losses. Greece got there by allowing their public sector to retire at the ridiculous age of 53.

The point I make here is it doesn't matter what path you take. Once you are considered to be insolvent from a debt vs GDP perspective it's over because no one will continue to lend you money.

Does anyone really think the Chinese will keep lending us money via buying treasuries if they don't think they will get paid back? You are delusional if you believe so.

Everyone likes to think that it's different over here. Yeah OK.... I recall a realtor telling me the same bullshit when I looked at houses during the peak of the housing bubble.

Like my father always says: "It is what it is". Insolvency is insolvency no matter what country you live in.

What's scary to me is I think we will be toast way before we reach the 9% yields that Greece did because we have issued so many trillions of dollars in Treasury bonds that we must pay interest on.

For example: If we hit 6-7% yields on the 10 year then a huge chunk of our GDP would have to be used to service our $14 trillion of public debt. Austerity would then be forced upon us because no one would lend to us without a realistic budget.

Fortunately, the US is allowed extra time to get its house "in order" because we have been the world's "safe haven" for several decades.

This luxury has arrogantly made us think that we can keep acting like Greece without the consequences. How else can you explain the passage of another $900 billion spending bill on tax cuts?

The bond market is currently telling us that we are no different than anyone else.

The US politicians need to learn the from the lesson that our realtors were taught a few short years ago: Housing doesn't always go up if you treat it like a Ponzi scam and our reckless spending is no different.

Government spending will be forced to collapse once we reach the tipping point of sustainability just like the Greeks and the housing industry learned.

If we fail to recognize this and take action then our debt bubble will end up popping just like the housing bubble did.