Wednesday, August 19th, 2026. Maneco64, home of alternative economics and contrarian views. We’re going to look at the bond market today. It’s the most important market for our current monetary system — the fiat debt-based system.
I worked in the bond market for over 20 years. That’s my specialty from my time in the financial sector in the City of London. I started out in Geneva, Switzerland. For the last few years I’ve been telling those of you who have been around that the bond bull market is over, and that is highly significant.
We had 40 years of plain sailing, downwind sailing, with bond yields and interest rates going ever lower. It was the cycle, and central banks took advantage of it with their money printing and artificially induced low interest rates. Now that’s over. The bond market is sailing windward, against the wind. I used to sail as a kid back in Brazil, and it’s a lot easier sailing downwind than windward. Unfortunately it’s going to be tough. All it means is that debt creation is going to be a lot harder. That’s a real problem, and we’re going to look at that.
Many people think this is going to be negative for gold, silver and commodities, but I think it’s going to be the other way around because they are going to implement financial repression. They will try to keep official interest rates always below the rate of inflation — and by inflation I mean the supply of money and credit. The inflation they tell us is 3% or 4% is not really inflation. That’s a highly doctored number called CPI, which is the consequence of the inflation. It’s going to be much worse than the 1970s because in the 1970s they didn’t really lie about what was going on in terms of inflation and prices. Now they do, and a lot of people are going to get fooled. If you’re stuck in the bond market you’re going to be losing out even though you think you’re not.
Before I start I want to give a shout-out to my precious metals dealer affiliates. In the US it’s Miles Franklin — they always have specials. You can look them up through my landing page; there’s a link below in the description. Here in the UK it’s Gold Investments. I’ve been dealing with them on a personal basis since the beginning of this century, around 2002, when I first started stacking. All the details are below in the description and they have promo codes you can use. With Gold Investments you can deal online or make an appointment and go up to their office in the City of London.
The bond market is really important, and I’m not saying this just because I worked in it. It’s important because of the system we’ve been under since President Nixon closed the gold window on August 15th, 1971. We’ve been under a debt-based fiat currency system. That means the currency that circulates is purely backed by debt. Therein lies the problem: debt cannot be extinguished with more debt. We can extinguish our personal debt with the debt-based currency, but for the system as a whole it is an impossibility. That’s why they have to keep the debt growing — they can’t pay it off.
We’re at almost $40 trillion in US national debt, and it’s really high here in the UK and everywhere else. I’m not just having a go at the US. That’s without adding all the unfunded liabilities, which run into hundreds of trillions. It’s an impossibility to pay off the debt.
From 1981 to 2021 we had the bond bull market. Cycles matter. From roughly 1942 to 1981 we were in a bond bear market. Interest rates bottomed during World War II under yield curve control — the 10-year was capped below 2%. Then especially in the early 1960s interest rates started rising, and we had a really bad bear market in bonds that culminated with the 10-year yield going up to about 15% in 1981. The Fed funds target or base rate went up to 20%. That helped save the dollar. The debt burden at the time wasn’t as bad as it is now. Federal public debt to GDP was around 33% because they had financial repression throughout the 1950s, 1960s and 1970s, combined with the baby boomers and population growth. The debt came down and inflation ate away at it.
Now we’re in a position where the debt is so huge it’s as big as if we were fighting a major world war. The cycles turned in 2021–2022. The rate we saw during the COVID crisis — 0.3% for the 10-year yield and about half a percent for the 30-year — that was the bottom. A lot of people, even so-called experts, bond fund managers, and Wall Street and City of London economists, thought we were going to keep having this bond bull market forever. On this channel I’ve been warning since 2020–2021 that the bond bull market was over. That’s a huge problem because it means it’s going to be really hard to finance everything.
The value of bonds is going to go down because instead of decreasing yields and interest rates like we had from 1981 to 2021, it’s going to go the other way. We were sailing downwind from 1981 to 2021. Now we’re sailing windward and the winds are going to be really tough.
Why do I say that? Globalization seems to be over. We’re not going to have the benefit of most foreign nations, including countries like China and others in the global south, being very willing to finance the deficits and the debt in the US and the West. They realize what’s going on. They realize that having too much of their monetary reserves in our government bond markets is dangerous because it can be frozen. That’s why they’re going into gold.
The other thing that 40 years of a bond bull market did is that it allowed the US economy and the UK economy (we’re like a mini-me here) and to a big extent Europe to become financialized. That means they became heavily dependent on debt and outsourced their industry to the rest of the world, especially China, starting with the WTO deal that let China in. We became heavily dependent on China and other countries for manufacturing, mining, extraction and processing of raw materials. This part of the economy in the West has been totally neglected. Now we have to get back to a real economy, but it’s going to take a while. It’s not something you can do in six months.
Coupled with that, we’re sailing windward against the wind with really tough storms ahead in the next few years. The debt is huge — not just public debt but corporate debt, personal debt, unfunded liabilities, and also the over-the-counter and exchange-traded derivatives. We’re talking trillions. With the cycles turned they can’t bring back a bond bull market. They’re going to have to try to keep interest rates and bond yields as low as possible. They’re going to do whatever they can. They’re going to lie about the CPI so that people think they’re getting a good deal in the bond market. But the smart money sees it, and that’s why people are turning to gold, silver and hard assets. I’ve been talking about this since the beginning of this decade because cycles turn.
What 40 years of easy credit has also done is lead to a massive growth in the welfare state, especially here in the UK and in Europe. Even in the US, which is supposedly more free-market oriented, you have loads of unfunded liabilities. That’s a huge problem now with interest rates going higher.
Since 2021–2022 bond yields in the US and the West have been going up relentlessly. We had a kind of respite from late 2023 until recently, but the other day the 30-year T-bond yield reached the highest level since 2004 — over 20 years. It’s going to keep going. This is not just something related to the US and the UK. Even German government bond yields — the 10-year is at the highest level since 2011. That’s very significant because prior to 2020 the Germans were very frugal. Their debt to GDP was under control and they were actually running budget surpluses. Now that’s all going out the window. This is not happening in isolation only in the US and the UK. It’s happening everywhere in the West.
What about China and other countries? China has a lot of debt, but I think they’ve been preparing for this because they’ve been accumulating gold — not just in the public sector (People’s Bank of China and state-owned enterprises) but among the general public. They’re pushing their people to have the safety of physical gold, not paper, because they know what’s coming. When you look at the reserve assets that foreign countries hold now, the amount of gold has gone above Treasuries, and I think that’s going to continue. Even allies like South Korea and Japan are going to wind down their Treasury holdings because the storm is coming. When the storm comes, everyone looks after themselves.
Unfortunately I think the UK is not well prepared for this because we have so little gold as a government — only about 310 tons. Gordon Brown sold half the gold back in the early part of the century, but even if he hadn’t sold that we’d still only have around 600 tons, which is not as much as other countries.
Most people don’t realize that the debt burdens are astronomical and the cost of financing this debt is going to increase. It’s not going to be an era of easy money and Goldilocks like from 1981 to 2021. A lot of people are going to be shortchanged because the people who work in the bond market, the pension funds, the fund managers, and the regulators are not going to give up on bonds. They’re going to keep the vast majority of the public investing in the old 60/40 portfolio. Yes, Morgan Stanley diluted that to 60/20/20 last year with 20% to gold and hard assets, but I think they’re just going to drag their feet.
One of the ways the state is going to wipe out the burden of the debt is through a soft default. Those people who depend on the state — here in the UK it’s about 30 million people, almost half the population — might still get the nominal amount they’re promised in pensions, benefits and public-sector salaries, but those amounts are going to become worth less and less. That’s how they get away with it. It’s going to happen across Western Europe, the US, Canada, Australia and the other Western countries.
Unfortunately it’s going to be really tough. Most people don’t know this is coming. Hopefully some of you will be prepared. I’ve been warning about this since I started the channel and even before that, when I used to warn colleagues at work, friends and family. A lot of people won’t listen, of course. I can’t do anything about that. I can only warn people.
So what do you do in this environment of ever-increasing rates, governments trying to keep interest rates as low as possible through financial repression, and diluting the value of the currency? You try to pay off as much debt as you can. You try to stay away from debt as much as you can. You try to create value for yourself and your family, and you try to put a little bit of sound money aside — physical gold and silver.
To conclude, the most important thing we have to realize is that we’re in an era where borrowing is going to be a lot tougher. People who have borrowed and need to roll over a mortgage or other debt are going to find it a lot harder. It’s going to be like prior to 1980, when it wasn’t easy getting credit. People are going to have to adjust to that, and governments are going to have to adjust to that. Our governments and central banks have a really tough few years ahead. Eventually things will turn and get better, but if you’ve been frugal and avoided having a lot of debt you can be fine. Some people will keep the debt and it will be debased, which in a way is good, but the problem with keeping debt is that you never know whether you can service it. I’d rather neither be a borrower nor a lender. That’s why I think hard assets are going to be the way forward, especially gold and silver.
With that, I’m going to wish you all a very good day. Take care. Bye.
