The bubble in government bonds is finally bursting

Here is Detlev Schlichter with his take on the German bond auction failure:

Here’s a quote to tempt you:

“While the math seems to be clear, the desire to believe in the infallibility and omnipotence of the state, which in our secular age has become the new deity, is powerful and may keep those government bonds bid for a while longer. Who knows? But when the ice breaks, this is surely one of the major trading opportunities in this unspeakable financial mess, maybe the short of the century. In this context, the events of last week were meaningful. Reality has finally caught up with German Bunds. The poor price action in Bund futures is indication that German government debt is losing its safe haven status. Fiscal concerns are now engulfing ‘the core’ of Europe. Again, investors desperately hold on to their belief that ‘safe havens’ exist somewhere out there, so they are stupidly piling into Gilts and Treasuries. Soon these will make an excellent short as well.”

You might also want to read these two articles for an interesting ‘conspiratorial’ background to the excellent piece above:

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About Andy Duncan

An Austrian Internet Vigilante trying to live Outside the Asylum
This entry was posted in Austrian Economics, Politics and tagged , , , , , . Bookmark the permalink.

2 Responses to The bubble in government bonds is finally bursting

  1. “Why would Germany, the only member of the EU with financial rectitude, not be able to sell 35% of its offerings of 10-year bonds? Germany has no debt problems”

    Really? Not from where I’m sitting!

    http://suboptimalplanet.blogspot.com/2011/11/deutschland-uber-alles.html

    • Andy Duncan says:

      Obviously one must ask the question, ‘if they’re so financially solvent, why are they borrowing so much money in the first place?’. But as Eric Sprott says, although they are officially at 81% debt to GDP, plus the rest, they’re probably still the best looking horse in the glue factory.

      If I was in Europe now, I’d rather hold German Euros, rather than any other kind, to ready myself for the transition back to the Deutschmark.

      Though obviously, gold and silver are better than any paper currency.

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