Zerohedge ... in the end everything goes to zero..

When people think of human progress some point to stocks as proof of its advancement. Yet in the end money is just a number and not human progress. Here is why?

Below is a chart recording the Dow since 1900. As of recent days the stock market has been very volatile. But relatively speaking as a whole the Dow is only a fraction of a percent down from its all time high.

Besides the 1929 market crash the value of the Dow has mostly been rising steadily. Today it is at record pace to the upside. Yet have you ever wonder why?

Today economic leading companies like Facebook, Amazon, and Google are on the cutting edge of innovation and making plenty of profit. While years past other corporations was leaders. The point is there was always a golden goose among corporate America. The worlds leading hub in growth and prosperity.

Yet we hear the country has a massive debt. $22 trillion and climbing. If you do not know what debt it then think of it as an I owe you number. America needs to someday pay back +$22 trillion to its debtors. So if you or I owe that kind of money think of all the interest we habe to pay let alone feel the financial burden on our shoulders. No wonder so many people in the country feel like they are living paycheck to paycheck. The country as a whole owes more than it spends.

So now we see that US borrows a lot. Yet where is this money it is getting? Most of it os through something called a US treasury bond. A bond is legal document promised by the US government to pay back its principal with interest after a certain duration. There are weekly bonds to yearly bonds and even multi yearly. The longest duration is the 30 year bond.

Chart above is the yearly interest yield from holding a 30 year bond. What you need to get out of this is that on a longer time frame the bond interest has been dramatically lowered since inception. We are talking from 1942 to present based off of chart. So today if I buy a 30 year bond I am going to earn less than 2% interest in a year for the next 30 years!

The main point I am getting at is stocks and bonds are interrelated. The higher one goes the lower the other. On a bigger scale you can see that clearly but at times both goes up such as in 1942 thru the 1970s. This is likely the casebook because the US dollar was actually backed by gold assets back then. Now it's back by a promise of words from the federal reserve.

We are on borrowed time here. As a country we have taken more and more debt to feed the stock market. Yet in return what we have really done is devalue the dollar and taking away the futures of our kids. That 2% rise in interest and falling in bonds is only going to continue to fall. That will mean future dollars created will be worth even less. if it ever reaches to zero I can only imagine stocks would be all time highs.

Well not exactly. We will get into this more in next post. Where we look at currently interest rates in US and around the world. We will find that negative rates do exist, but economic prosperity will be lacking.

Images posted courtesy of stockcharts.com