Bond Market Failure Accelerating

As I’ve been saying for a long time now, as US debt levels reach historic highs, the bond markets will implode.

Think about this:

Interest rates are supposed to reflect the risk of an investment.

If an investment is risky, its interest rates will be high.

If an investment is a sure thing, its interest rates will be low.

This is why credit card companies charge outrageous rates to people with bad credit scores and why government bonds tend to have extremely low interest rates.

Now – the US is now at near historic highs in terms of its debt to GDP ratio, yet its bond interest rates are at historic lows.  This is completely the opposite of what we should be seeing.  We should see interest rates rise in proportion to the amount of debt issued by the US.  As the US issues more debt, obviously its risk of default rises.

The bond markets are a complete joke.  It finally appears that foreign governments are starting to catch on.

What this means is that interest rates will rise, and when they do, the US will be forced into a situation that requires it to print money in order to make the payments on the debt it owes.

Hyper-inflation will result from this.