The Bond Scam

What would happen if we got rid of the bond market

I’ve been looking at the bond market for over 35 years, and it’s as confusing today as it was 35 years ago.

It shouldn’t be confusing for a bond is just a loan.

Yet economists have gobbledygooked bonds into a state of incomprehensibility.

They hired a guy who sits in a basement in a building on Wall Street who runs a little machine.  He turns the crank and the machine spits out eco-babble faster than you can learn it.

This guy is good at what he does.

Go read any analysis of the bond market to see what I mean.  

They’re just making shit up.

Now, I understand that professional bond traders think they understand what they’re talking about, but the average Joe does not.  

Nor do I suspect the politicians who are being asked to supervise this mess when it comes to government debt.

When someone can’t explain what they’re selling, they’re probably taking you for a ride.

The bond market needs to go.  All of it.  The whole shebang, lingo too -coupon, maturity, face value, yield, secondary markets, credit markets, net present value, gross financial needs.

And these are the easy terms.

Go fuck yourself, Señor Huckster.  Take your act, you carnival barker, and bulldoze it off the White Cliffs of Dover.

What has the international bond market done for Greece?

Debt and lots of it.

Ten years after the financial crisis of 2008 Greece is still loaded down with incomprehensible debt.

At its peak the debt was $350 billion dollars; yet there are only 10 million people live in Greece.

This translates to $3,500 for each Greek citizen.

How did the bond market help Greece?

It didn’t.

The problem with bonds is that they gives the false illusion of wealth.  The bank gives you a lot of money, but if you don’t spend it wisely, you’re sunk.  On top of that you have to pay it back.

What did Greece spend the money on?

Pensions, social spending, defense.  Greece tried to fool itself that it was still pulling in money.

When the 2008 collapse hit revenue dropped, just as it did in Venezuela, but the debt continued all of which illustrates a problem.

Man is inherently stupid.

Man can not  borrow responsibly nor can he comprehend the scammer who is loaning him the money.

Even the professionals get scammed whether they are buying or selling. Just ask CalPERS.

All of which points out that the bond market needs to be reformed.  Indeed the entire concept of interest needs to be reformed.

Maybe we can learn something from Islam which figured out a long time ago that there was something not right about this loan game.

There exists no other field in which a seller extracts a pound of flesh on a percentage basis.

Suppose your surgeon takes out your appendix and decides to extract 5% of your wealth for the rest of your life. Would that be OK with you?

It would certainly be good for the surgeon who would become incredibly rich.

No other field save banking operates on a percentage basis.

What this has produced is an incredible, unwarranted accumulation of wealth within the banking profession.

There’s no justification for this.

Bankers are stewards of the public money supply and should be reimbursed for the hours they put in.

They should not be permitted to operate on a percentage basis.

Just because that’s the way it’s been done does it mean that’s the way it should be done.

Suppose bankers were only allowed to charge a flat fee for the loans that they made. There is no reason we could not have tiers of charges for larger loans.

On top of that suppose that banks were not permitted to be creditors at all.

Suppose that banks had to invest and become equity owners?

Oh, but they don’t want to be.

Who gives a fuck?

Citizens must no longer pay because of theft or poor decision making at the top.

One simple reform is needed.

Eliminate bonds in favor of equity.

Create a new type of non-voting, non-controlling equity vehicle with defined rights and privileges that forbid or mitigate payback in down times.

Nobody is paying back anything to anybody in times of stress.

Yes, the borrower is required to pay back the lender, but that is only if the funds are available.

If you’re JP Morgan, Goldman Sachs or the IMF, you have to take a real risk, not a phony risk.

Bonds are a coward’s risk.

If Goldman wants to invest in Venezuela let them be partners, not parasites.

If Rothschild wants to invest in Greece let them be partners, not parasites.

Let them take a real risk.

When these banks have to take real risks they will go to greater lengths to insure that the money they invest is more wisely spent.

Loans will be smaller, focused and more prudent.

Furthermore, if the borrower defaults and the lender decides to seize control of the asset, the borrower will still have equity that the lender can not negate.

Such a mechanism prevents lenders from gaining unfair wealth though default.

Wouldn’t this be a good thing?

Duh.