Bill Bonner, reckoning today from Poitou, France...
It was a joke. A spoof. A send-up.
Or…maybe not.
We refer to the “Report from Iron Mountain.” Published in 1967, it was a bestseller. And yet, Lyndon Johnson ‘hit the roof’ when he read it. He wanted it banned.
Most likely, it really was meant as a satire on public policy…supposedly created by government hacks themselves. It claimed to be the product of a secret panel, acting like a think tank…tackling tough issues…doing a ‘deep dive’ into the logic of US foreign policy.
It was all a lie; but the surprise was – the important insights were far truer than anything you could get from The New York Times.
We interrupt this program with a news flash. Reuters:
LONDON (Reuters) - A rout in government bond markets deepened on Wednesday with U.S. yields reaching their highest in 16 years, souring appetite for riskier assets as investors bet that interest rates will remain persistently high, boding ill for the world economy.
The U.S. Treasury 10-year yield rose 6.9 basis points (bps) to 4.872%, its highest since 2007, after climbing nearly a dozen bps on Tuesday's job openings data that pointed to resilience in the U.S. economy.
Thirty-year Treasury yields rose above 5% for the first time since August 2007, just before the global financial crisis.
European bonds followed suit, with yields on Germany's benchmark 10-year debt rising above 3% for the first time since 2011. The country's 30-year yield climbed to its latest 12-year high.
The Fed giveth absurdly low interest rates, which encouraged the world to take on $307 trillion in debt. Now, Mr. Market taketh away the excess.
That’s why we’ve included no bonds in our allocation portfolio.
The Meltdown Arrives
Here’s the view from Bloomberg:
Long Bonds’ Historic 46% Meltdown Rivals Burst of Dot-Com Bubble
Losses on longer-dated Treasuries are beginning to rival some of the most notorious market meltdowns in US history.
Bonds maturing in 10 years or more have slumped 46% since peaking in March 2020, according to data compiled by Bloomberg. That’s just shy of the 49% plunge in US stocks in the aftermath of the dot-com bust at the turn of the century. The rout in 30-year bonds has been even worse, tumbling 53%, nearing the 57% slump in equities during the depths of the financial crisis.
Our guess: stocks will follow.
But let us return to our regularly scheduled programming.
Today, we’re looking at how the crusading spirit makes it almost impossible to return to a normal economy and a more civilized nation. The Guardian:
DeSantis invokes China ‘boogeyman’ narrative amid flailing campaign
It was a desperately needed moment of grandeur for Ron DeSantis: the Florida governor’s strongman act over China briefly lifting his stuttering presidential campaign during last week’s Republican primary debate in California.
But what DeSantis left unsaid as he railed against China’s growing global influence, while promising a “hard power” approach to Beijing should he win the White House, was how his posturing was hurting students and families back in his home state.
…DeSantis stripped four private schools of state scholarship money, alleging without evidence they had “direct ties to the Chinese Communist Party”.
Stoking Fear
Are ‘direct ties to the Chinese Communist Party’ a bad thing? How about direct ties to the Republican party? How about the party across the street?
Here’s Percy Allan to explain it:
…stoking fear of China is a vote-winner across party lines. Indeed, hatred of China is now the single issue that unites Democrats and Republicans.
Biden referred to China as “bad people” who when they have problems do “bad things.”
The demonisation of China has clearly worked. The 2023 survey by the Pew Research Center found that 83% of Americans hold negative views of China. The share who says China is an “enemy” is now 38%. An IPSOS poll found one-third of Americans view China as an imminent threat and two in five Americans think that war with China is likely in the next five years.
Are the Chinese ‘bad people?’ Bad like Germans in 1914? Bad like Muslims in the 12th century?
Coincidentally, yesterday marked the day in 1147 that the French army, commanded by Louis VII arrived at the gates of Constantinople. It had come all the way from Vezelay in France, gathering more soldiers, adventurers and camp followers along the way. Bernard of Clairvaux was a marvelous speaker, apparently. In every town, he mounted pulpits or scaffolds and roused the rabble to leave their ordinary lives, ‘take up the cross’ and follow him on this Great Crusade against the Moors, Saracens, Arabs, and all other Muslims.
Surely, the Muslims were bad. Everyone said so! And so the great host of Louis VII lumbered, stumbled, dragged itself down through kingdoms and duchies, towns and farms. The locals hid their wives and daughters, their tools and treasures. The mob was an unruly collection of misfits, ne’er-do-wells, and rogues…along with a few knights and true believers, who actually thought they were making the world a better place. And they all needed to eat.
The Road to Damascus
Louis was to be joined there, at Constantinople, by another large, and in some ways perhaps even more disagreeable army, composed mostly of German speakers, led by the Holy Roman Emperor himself, Conrad III. And of course, it was not long before the two groups were fighting each other.
It was partly to avoid internal conflict, we suppose, that the two armies decided to take different routes to the Holy Land.
Constantinople was the headquarters of the Eastern Empire. It was inhabited by Christians. But they were Eastern Orthodox, not subject to the church of Rome. Emperor Manuel Comnenus may have had mixed feelings about the crusader cause. But he was clear about one thing: he wanted to get rid of this horde of “Latin thugs and barbarians” as quickly as possible. He arranged for them to be ferried across the Bosporus so they could continue their march to Jerusalem. He cautioned them to stick to the longer route along the coast of what is today Turkey. Cutting through the heart of Anatolia was likely to bring conflict with the Seljuk Turks.
The French followed his instruction. The Germans took their chances overland and were almost wiped out by the Turks at the battle of Dorylaeum. Many Germans who weren’t killed were taken captive and sold into slavery.
Finally, the ragtag remnants of both German and French forces arrived in the Holy Land. At the time, Damascus, was perhaps the only major city in the area that might have been a useful ally and perhaps a refuge and source of supplies. Nevertheless, the crusaders decided to attack it. The assault failed. John Julius Norwich described what happened next:
There is no part of the Syrian desert more shattering to the spirit than that dark-gray, featureless expanse of sand and basalt that lies between Damascus and Tiberias. Retreating across it in the height of the Arabian summer, the remorseless sun and scorching desert wind full in their faces, harried incessantly by mounted Arab archers and leaving a stinking trail of dead men and horses in their wake, the Crusaders must have felt despair heavy upon them.
The crusader spirit dimmed. But the flame did not die out. There came a Third Crusade…and then a Fourth Crusade (in which the crusaders, led by a blind Venetian doge attacked Constantinople)…and a Children’s Crusade (in which thousands of children were sent off…and later starved, or sold into slavery…nobody knows for sure what happened to them).
In all, there were 8 crusades – all unnecessary, pointless, and fruitless.
Why so many? Why any at all …then or now?
That’s what the ‘Report from Iron Mountain’ explains…
Stay tuned.
Regards,
Bill Bonner
Joel’s Note: Meanwhile, back to the bond market meltdown… Dan sent us another fugly chart this morning. Sensitive readers may wish to avert their eyes…
“AGG is the ETF that tracks the Bloomberg Aggregate Bond Index,” explains Dan, “the biggest bond ETF and a proxy of all bonds (government, corporate, Fannie, Freddie, Ginnne, asset backed securities, mortgage backed securities, and commercial mortgage backed securities).”
Unlike TLT, which we featured in this space yesterday and which is only long-term government bonds, AGG hasn't made a new multi-year low.
“Not yet,” adds Dan.
As noted above, rates have lately spiked to their highest levels since 2007… right before a Niagara of subprime mortgage defaults swamped the markets, dragging down some of the nation’s largest banks and financial institutions along with it. So, what’s pushing up rates this time? Dan, again…
“Some say it's fiscal policy. The national debt went up over $250 billion...on Tuesday alone! The Feds will have to sell more debt at higher rates...and finance old debt at higher rates. It's the fiscal 'doom loop' that makes net interest expense the single highest line item in the budget. Meanwhile falling stock, house, and bond prices reduce federal tax revenues...for bigger deficits. And all of that BEFORE a recession...which our Doom Index is saying is nigh. Stay safe. And watch your wallet.”
Unlike government statistics – which are routinely “revised” after the fact, and which vainly attempt to capture esoteric, egg-headed nonsense anyway – BPR’s Doom Index 2.0 actually measures real world indicators… things like rig counts, oil tanker counts, shipping container activity, commercial real estate, etc… to get a feel for how the real economy is doing. Again, that’s real people, exchanging real goods and services in the real world economy.
Members can find it in Dan and Tom’s weekly updates and the monthly BPR report. If you’re not already enjoying all our paid research, feel free to join us for the ride, here…
We non-foxes in this system become the victims of the elites when necessary. First, they have to allow us the illusion of our being participators and stake-holders. This step, though repugnant to them by nature, is necessary to build the pot up so that when the time comes, they can walk off with all the assets. Our "investments" are the ante and wagers, and when the time is best, they call, play their superior hands, and take the "winnings", which are now being raked off the table. It's an old scam, and we never figure it out, like Charlie Brown and Lucy with the football scam.
In late 1972, the LA-based group WAR released "The World is a Ghetto". At the time, I thought it was kind of nihilistic; that is, until I lived it. "Don't you know, that it's true, that for me and for you the world is a ghetto?"
Bill is right. Why do we irrationally hate such a wonderful rights-respecting country like China? It makes no sense! All this bad stuff I've read about that country - millions upon millions of their citizens killed during their revolution. Their government enforcing a one-child per couple policy. Enslaving a Muslim population. Sealing their citizens in their apartments during COVID, not to mention letting COVID escape from one of their labs. Stealing US intellectual property. They have such a pure and wonderful ideology (not too different from our own Democrats) that who cares if they infiltrate our institutions. Come on - this is all child's play when you consider the benefits of trading with them and investing in their companies, especially their companies that have ties with the Chinese military. And don't forget letting them buy up our farmland, especially land near our military bases. What could possibly go wrong? Come on - who doesn't like chicken wings, pork fried rice, and egg rolls. That's all that this wonderful benevolent nation is about!