The Coming Bond Market Collapse (eBook)

MICHAEL G. PENTO is the President and founder of Pento Portfolio Strategies (PPS). PPS is a Registered Investment Advisory Firm that provides money management services and research for individual and institutional clients. Michael is a well-established specialist in markets and economics and a regular guest on CNBC, CNN, Bloomberg, Fox Business Network, and other international media outlets. His market analysis can also be read in most major financial publications, including the Wall Street Journal. He also acts as a financial columnist for Forbes, contributor to TheStreet.com, and a blogger at the Huffington Post. Prior to starting PPS, Michael served as a senior economist and vice president of the managed products division of Euro Pacific Capital. Additionally, Michael has worked at an investment advisory firm where he helped create ETFs and UITs that were sold throughout Wall Street. Earlier in his career, he spent two years on the floor of the New York Stock Exchange. He has carried Series 7, 63, 65, 55, and Life and Health Insurance Licenses. Michael graduated from Rowan University in 1991.

Introduction xi

Acknowledgments xv

Chapter 1: As Good as Gold? 1

The Great American Money Machine 4

"Dad, Where Does Money Come From?" 8

The Implications of a Fiat Currency 11

Notes 14

Chapter 2: The Anatomy of a Bubble 15

The Great Depression--A Historical Comparison 19

Two Decades of a Bubble Economy 25

Does CDO Rhyme with Tulip Bulb? 29

Today's Bubble in Bonds Rhymes with the

Debt-Fueled Real Estate Crisis 31

Notes 33

Chapter 3: Bernanke's Hair-of-the-Dog Economy35

Austrian Trade Cycle Theory versus

Keynesian Toys and Candy 36

"End This Depression Now!"--The Game Show41

"I'm Not Addicted to Easy Money . . . and I Can Stopat Anytime" 50

No Way Out--Starring Ben Bernanke . . . 56

The Thirty-Year Party in the Bond Market 62

Notes 65

Chapter 4: Deflation Phobia and Inflation Philos 67

Fed Busters 69

Common Fed-lore Myth 1--The Myth of the Deflationary DeathSpiral Monster 69

The Truth about Price Deflation 72

Fed-Lore Myth 2: Japan Proves that

Debt and Deflation Go Hand-in-Hand 77

Myth 3: The Keynesian Fed-Lore of the Phillips Curve 86

Myth 4: You Can Rely on Government Statistics 92

Myth 5: The Fed Was Created for Your Benefit 100

Notes 101

Chapter 5: The Bubble Reality Check 103

The Investor Reality Check 104

The Interest Rate Reality Check 110

The Teaser Rate on U.S. Debt--Reality Check 115

Banker Reality Check 119

The China Reality Check 127

Washington's Addiction to Debt--Reality Check 134

Notes 140

Chapter 6: The End of an Empire 141

The End of a Monetary System 145

The Economic Laws of Debt 152

U.S. Debt--This Time It's Different 153

Is Austerity a Bad Thing? 157

Where Will All the Money Go? 160

The Bell Is Ringing for the Bubble in the Bond Market 163

Banana Ben to the Rescue 167

The Cost of an Empire 169

Notes 173

Chapter 7: Real World Europe 175

The Creation of the Euro 176

Greece 183

Dr. Hayek vs. Dr. Keynes 190

Dr. Keynes and Dr. Hayek and

America's Bout with Hyperinflation 195

I'll Take Currency Debasement for $40 Billion . . . aMonth 200

Final Jeopardy 203

The Canary in the Coal Mine 204

Notes 205

Chapter 8: The Debt Crisis 207

From Pioneer to Penurious . . . 207

The Sixteenth Amendment . . . The Beginning of the SlipperySlope 209

Mexican Debt Crisis 215

The Asian Contagion 218

Russian Debt Crisis 220

The Debt Crisis Fallout 223

What Would It Look Like Here? 225

It Can't Happen Here? 233

I Don't Want to Be Right 238

Conclusion 247

Notes 248

Chapter 9: What Can the Government Do to Mollify the DebtCollapse? 251

The Principles of a Free Market 252

Solution 1: Allow the Deleveraging Process to Happen 257

Solution 2: Strengthen and Stabilize the U.S. Dollar 260

Solution 3: Allow Interest Rates to Rise to the Supply ofSavings versus the Demand for Money 262

Solution 4: Balance the Budget 264

Solution 5: Aggressively Reduce the Amount Of Regulatory Burden270

Solution 6: Simplify the Tax Code 273

Solution 7: Fair Trade and a Free Trade 276

Solution 8: Overhaul Education 277

Conclusion 278

Notes 283

Chapter 10: How to Invest Your Money Before and After theBond Bubble Bursts 285

What to Own When U.S. Debt and the Dollar Collapse 289

Notes 294

About the Author 295

Index 297