Sovereign bonds are the senior most assets in the current debt-based financial system.
The Western governments at the top of the food chain with the greatest financial, economic, and political clout own a majority of these bonds.
Issuing more debt has always been the solution for these governments promising future social security payments.
The real issue is most of these nations have Debt to GDP ratios well north of 300% when you consider unfunded liabilities (the social spending programs).
Unfunded Liabilities/Debt/GDP Ratios
Since cutting social spending is usually considered political suicide, politicians simply push to issue more debt to finance old debt that is coming due. In the fourth quarter of 2014, the US issued over $1 trillion in new debt simply to pay back old debt that was coming due.
Greece is simply the first domino to fall in the crisis that may engulf major Western economies backstopped by a major bond bubble. Between 2000 and today, the bond market tripled in size. Today, it’s $100 trillion and it backstops over $555 trillion in the derivatives market.
There is no fix and the political elite, the big banks, and the Central Banks will continue to kick the can as far as it can possibly be kicked before taking the inevitable final hit.
And the 1st hit may have just occurred this past month in Western economies as interest rates rose…
Interest Rates: June to July 2015
