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Seconded! Something bad is happening or is about to happen. But for the life of me I couldn't tell you what it is or what the ramifications both globally and lo

Seconded! Something bad is happening or is about to happen. But for the life of me I couldn't tell you what it is or what the ramifications both globally and locally are. Is he basically saying that the shit is about to get real? If so, what is the shit? edit: apologies for swearing, but I thought it was appropriate here given the _very_ strong language of the article. And I hate using/(being subjected to) aster*sks.

Kluny 11y ago
I am also waiting for a well informed adult to give us a summary. But from what I know of the bond market, bonds have been trading at an absurdly low rate for the past 20 years or so (please correct me if I'm wrong). This is an overdue correction, and is definitely bad for some people who have taken out an irresponsible number of bonds. But, possibly, will be very good for bond investors? I think?
- igravious 11y ago
  And please correct me if I am wrong but when you own a bond someone owes you money. Thus the low rate of interest. (Very low risk vouchsafed by nation states.) If bond rates start going up then...? Bad for governments looking to finance services? As you can see, I'm really trying to understand from whence the article's tone. Who's gonna get burnt? Probably Joe Schmoe again, huh.
  - Kluny 11y ago
    Correct, I should have said "issued an irresponsible number of bonds", not "taken out". And yes, I would also like to know who gets burnt. It isn't very clear.
fauigerzigerk 11y ago
The shit is that those who have lent money to others through long dated bonds lose money if inflation rises faster than expected, because bonds pay a fixed interest rate for a fixed period of time. As no one wants to lose money, they sell the bonds and bond prices crash, leading to more losses. People who can afford to lend money to others for extended periods of time are the wealthy and those with a lot of money in pension funds. So the losers' side is skewed towards the wealthier and the older. On the winning side are heavily indebted governments and corporates as well as people with fixed rate mortgages. As government spending has a redistributive effect and wages tend to rise with (moderate) inflation, the less well off, younger, working people are on the winning side as well. So there you have your political dividing lines. Newspapers who cater to those on the losing side (such as the Telegraph) are going to get hysterical at the sight of even the slightest whiff of inflation. There are global implications as well. Money flows where interest rates are higher. If interest rates rise in the US and in Europe, money will flow there from countries like India, Brazil or Indonesia. The currencies of those countries will fall versus the dollar because they are being sold, and as they are indebted in dollars, their debt load increases. In previous episodes that has lead to defaults among poorer countries. But this time, these countries are not as heavily indebted as back in the 1980s and 1990s. Some of them are under pressure from low commodity prices though.

Kluny 11y ago

I am also waiting for a well informed adult to give us a summary. But from what I know of the bond market, bonds have been trading at an absurdly low rate for the past 20 years or so (please correct me if I'm wrong). This is an overdue correction, and is definitely bad for some people who have taken out an irresponsible number of bonds. But, possibly, will be very good for bond investors? I think?

igravious 11y ago
And please correct me if I am wrong but when you own a bond someone owes you money. Thus the low rate of interest. (Very low risk vouchsafed by nation states.) If bond rates start going up then...? Bad for governments looking to finance services? As you can see, I'm really trying to understand from whence the article's tone. Who's gonna get burnt? Probably Joe Schmoe again, huh.
- Kluny 11y ago
  Correct, I should have said "issued an irresponsible number of bonds", not "taken out". And yes, I would also like to know who gets burnt. It isn't very clear.

fauigerzigerk 11y ago

The shit is that those who have lent money to others through long dated bonds lose money if inflation rises faster than expected, because bonds pay a fixed interest rate for a fixed period of time. As no one wants to lose money, they sell the bonds and bond prices crash, leading to more losses. People who can afford to lend money to others for extended periods of time are the wealthy and those with a lot of money in pension funds. So the losers' side is skewed towards the wealthier and the older. On the winning side are heavily indebted governments and corporates as well as people with fixed rate mortgages. As government spending has a redistributive effect and wages tend to rise with (moderate) inflation, the less well off, younger, working people are on the winning side as well. So there you have your political dividing lines. Newspapers who cater to those on the losing side (such as the Telegraph) are going to get hysterical at the sight of even the slightest whiff of inflation. There are global implications as well. Money flows where interest rates are higher. If interest rates rise in the US and in Europe, money will flow there from countries like India, Brazil or Indonesia. The currencies of those countries will fall versus the dollar because they are being sold, and as they are indebted in dollars, their debt load increases. In previous episodes that has lead to defaults among poorer countries. But this time, these countries are not as heavily indebted as back in the 1980s and 1990s. Some of them are under pressure from low commodity prices though.