The Coming Bond Market Collapse: How to Survive the Demise of the U.S. Debt Market

283 Pages·2013·1.82 MB·English

by  Michael G. Pento

Contents
Introduction
Acknowledgments
Chapter 1: As Good as Gold?
The Great American Money Machine
“Dad, Where Does Money Come From?”
The Implications of a Fiat Currency
Notes
Chapter 2: The Anatomy of a Bubble
The Great Depression—A Historical Comparison
Two Decades of a Bubble Economy
Does CDO Rhyme with Tulip Bulb?
Today’s Bubble in Bonds Rhymes with the Debt-Fueled Real
Estate Crisis
Notes
Chapter 3: Bernanke’s Hair-of-the-Dog Economy
Austrian Trade Cycle Theory versus Keynesian Toys and Candy
“End This Depression Now!”—The Game Show
“I’m Not Addicted to Easy Money . . . and I Can Stop at
Anytime”
No Way Out—Starring Ben Bernanke . . .
The Thirty-Year Party in the Bond Market
Notes
Chapter 4: Deflation Phobia and Inflation Philos
Fed Busters
Fed-Lore Myth 2: Japan Proves that Debt and Deflation Go
Hand-in-Hand
Myth 3: The Keynesian Fed-Lore of the Phillips Curve
Myth 4: You Can Rely on Government Statistics
Myth 5: The Fed Was Created for Your Benefit
Notes
Chapter 5: The Bubble Reality Check
The Investor Reality Check
The Interest Rate Reality Check
The Teaser Rate on U.S. Debt—Reality Check
Banker Reality Check
The China Reality Check
Washington’s Addiction to Debt—Reality Check
Notes
Chapter 6: The End of an Empire
The End of a Monetary System
The Economic Laws of Debt
U.S. Debt—This Time It’s Different
Is Austerity a Bad Thing?
Where Will All the Money Go?
The Bell Is Ringing for the Bubble in the Bond Market
Banana Ben to the Rescue
The Cost of an Empire
Notes
Chapter 7: Real World Europe
The Creation of the Euro
Greece
Dr. Hayek vs. Dr. Keynes
Dr. Keynes and Dr. Hayek and America’s Bout with
Hyperinflation
I’ll Take Currency Debasement for $40 Billion . . . a Month
Final Jeopardy
The Canary in the Coal Mine
Notes
Chapter 8: The Debt Crisis
From Pioneer to Penurious . . .
The Sixteenth Amendment . . . The Beginning of the Slippery
Slope
Mexican Debt Crisis
The Asian Contagion
Russian Debt Crisis
The Debt Crisis Fallout
What Would It Look Like Here?
It Can’t Happen Here?
I Don’t Want to Be Right
Conclusion
Notes
Chapter 9: What Can the Government Do to Mollify the
Debt Collapse?
The Principles of a Free Market
Conclusion
Notes
Chapter 10: How to Invest Your Money Before and After
the Bond Bubble Bursts
What to Own When U.S. Debt and the Dollar Collapse
Notes
About the Author
Index

Cover Design: John Wiley & Sons, Inc.
Cover Image: © Mike Kemp/Jupiter Images Copyright © 2013 by Michael G.
Pento. All rights reserved.
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Disclosure: Michael Pento is the Founder and President of Pento Portfolio
Strategies (PPS). This work has been written solely for informational purposes
and readers should contact an investment advisor before acting on any
information contained in this book. No information in this work constitutes an
offer to sell or buy any financial instruments or to provide any investment
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Library of Congress Cataloging-in-Publication Data Pento, Michael, 1963—
The coming bond market collapse : how to survive the demise of the U.S. debt
market / Michael Pento.
pages cm
Includes bibliographical references and index.
ISBN 978-1-118-45708-5 (cloth) — ISBN 978-1-118-45717-7 (ePDF) ISBN
978-1-118-45716-0 (Mobi) — ISBN 978-1-118-45715-3 (ePub) 1. Bond
market–United States. 2. Bonds–United States. I. Title.
HG4910.P426 2013
332.63′23—dc23
2012049828
To my wife, Jenifer, and my two children, Michael and Giamarie. It is my hope
and prayer that my kids will grow up in a land that offers them the freedom to
bring their dreams to fruition, rather than a government-provided guarantee of
mediocrity. To my parents, Frank and Mary, who ignited my passion for
freedom. And to God for allowing us all the autonomy to choose.
Introduction
In November 2011, I founded a money management firm, Pento Portfolio
Strategies, for the primary purpose of preparing clients’ investments for what I
saw as the next financial crisis. Back in 2005, I correctly predicted the bubble in
real estate. However, the new catastrophe I see emerging makes the housing
bubble pale in comparison. America now sits in the latter stages of the biggest
asset bubble in the history of the planet. The bursting of this bubble will send
shock waves throughout the global economy and will have a gravely negative
impact on the American standard of living. This bubble will have a profound
effect on all Americans—especially those who fail, or refuse, to see it coming. It
will affect your job, the value of your house, your savings, and your way of life.
The bubble is U.S. Treasury debt.
But don’t think of this author as some Cassandra that is calling for the end of
the United States. Cartographers will not have to expunge America from their
maps. This great country will survive and thrive after the collapse of the U.S.
debt market occurs. The point of this work is to guide our leaders down a path
that leads toward a direction that mollifies the damage already done. It will also
offer investors the best chance to preserve their current standard of living.
Investors, seeking refuge in what they perceive as the safest of all havens (U.S.
Treasuries), have been procuring government debt at unprecedented rates despite
the record low interest rates they offer. The Federal Reserve, under the
stewardship of Ben Bernanke, has rendered our continued solvency as a nation
dependent on the perpetual continuation of artificially produced low interest
rates. However, it is clear that Bernanke cannot keep rates low forever. The
Federal Reserve’s misguided effort to counterfeit our way to prosperity, coupled
with the flawed Keynesian deficit spending model that our government embraces
with alacrity, has led to record debts that will never be able to be repaid.
The bursting of the bubble in Treasuries will cause a massive interest rate
shock that will drive the U.S. consumer and the government into bankruptcy and
send many people throughout the globe into poverty. In order for you to survive
the coming debt crisis, you need to be informed and prepared.
In this current economic environment, our government seeks a condition of
perpetual inflation in order to maintain the illusion of prosperity and solvency.
The problem with this addiction to money printing is that once a central bank
starts, it can’t stop without dire, albeit in the long-term healthy, economic