I am becoming more and more convinced that the ending of the ponzi scheme occurs when yields on government debt goes up. This is very backwards from typical market behavior. When yields moved higher (bonds were being sold) stocks were usually bought. (I am talking about Treasury yields, not the Fed Funds rate). This is because it showed signs of economic strength as the economy was heating up.
This time will be very different. It will be because trust will dissipate from government debt. Inflation expectations will rise demanding more return for the bonds. This is regardless of economic strength.
Since Ponzis rely on liquidity, if government debt yields were to really spike higher this would be a very big impediment.
Probably does not start in the U.S. but in Europe or Japan. That is why things in Europe are so important.
Greek bonds dropped as the nation’s deteriorating finances deterred investors from owning the government’s debt.
The difference in yield, or spread, between 10-year Greek securities and benchmark German bunds widened to 156 basis points, the most since July 16. The yield on the bond climbed 11 basis points to 4.89 percent as of 4:45 p.m. in Athens. The yield has risen 22 basis points in the past three days.
This is not glaring yet. At some point, Greece, Spain, Japan, (or some government I am not watching as closely) could start the domino affect.