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


Praise for The Coming Bond Market Collapse

"Few people possess Michael's understanding of monetary policy, interest rates and currencies, and their impact on financial markets. This book is mandatory reading for anyone who wants to know where the bond market is headed and why."
--Michael Ozanian, Executive Editor of Forbes Media

"Michael Pento's The Coming Bond Market Collapse is an act of love. It is an act of love for his country because he stands apart from so many half-hearted commentators who are unwilling to give America what it needs, which is a clear, plainspoken, honest warning about what our ruling class is leading us into. It is also an act of love for investors, too, in that it prepares them to deal with what is very likely to happen given the fact that, so far, America has failed to heed those warnings. Michael ends the book with a quote from Thomas Paine: 'These are the times that try men's souls.' True, but they are also times that will try men's portfolios, and The Coming Bond Market Collapse will help them withstand both trials."
--Jerry Bowyer, Editor in Chief of Affluent Investor and Forbes contributor

"This book is a treatise on the logic and economics behind the upcoming collapse of the U.S. debt market. It is not written to scare the public, nor does it use hyperbole or sensationalism. The work simply explains the dynamics behind the bond bubble and how its demise will affect the global economy and markets. Most importantly, it offers a solution to how the United States can escape some of the fallout from the collapse, but only if we take the appropriate action now. This book is a blessing for the American consumer and investor and should be mandatory reading for anyone who desires to have their portfolio thrive during the tumult that lies just ahead."
--Peter Grandich, founder of and Grandich Publications, LLC, and editor of The Grandich Letter

"If my earlier books did not convince you that the debt and dollar bubbles propping up America's artificial economy are destined to pop, with horrific consequences for our nation when they do, this well-argued refresher course from Mike Pento is a must-read. Those already accustomed to receiving their 'Pentonomics' in small portions are sure to enjoy this larger dose."
--Peter Schiff, bestselling author of Crash Proof 2.0 and The Real Crash, host of the nationally syndicated Peter Schiff Show, and CEO of Euro Pacific Capital and Euro Pacific Precious Metals

Michael G. Pento is the President and founder of Pento Portfolio Strategies (PPS). PPS is a Registered Investment Advisory Firm that provides money management services and research for individual and institutional clients.

Michael is a well-established specialist in markets and economics and a regular guest on CNBC, CNN, Bloomberg, Fox Business Network, and other international media outlets. His market analysis can also be read in most major financial publications, including the Wall Street Journal. He also acts as a financial columnist for Forbes, contributor to, and a blogger at the Huffington Post.

Prior to starting PPS, Michael served as a senior economist and vice president of the managed products division of Euro Pacific Capital. Additionally, Michael has worked at an investment advisory firm where he helped create ETFs and UITs that were sold throughout Wall Street. Earlier in his career, he spent two years on the floor of the New York Stock Exchange. He has carried Series 7, 63, 65, 55, and Life and Health Insurance Licenses. Michael graduated from Rowan University in 1991.

Introduction xi

Acknowledgments xv

Chapter 1: As Good as Gold? 1

The Great American Money Machine 4

“Dad, Where Does Money Come From?” 8

The Implications of a Fiat Currency 11

Notes 14

Chapter 2: The Anatomy of a Bubble 15

The Great Depression--A Historical Comparison 19

Two Decades of a Bubble Economy 25

Does CDO Rhyme with Tulip Bulb? 29

Today’s Bubble in Bonds Rhymes with the

Debt-Fueled Real Estate Crisis 31

Notes 33

Chapter 3: Bernanke’s Hair-of-the-Dog Economy 35

Austrian Trade Cycle Theory versus

Keynesian Toys and Candy 36

“End This Depression Now!”--The Game Show 41

“I’m Not Addicted to Easy Money . . . and I Can Stop at Anytime” 50

No Way Out--Starring Ben Bernanke . . . 56

The Thirty-Year Party in the Bond Market 62

Notes 65

Chapter 4: Deflation Phobia and Inflation Philos 67

Fed Busters 69

Common Fed-lore Myth 1--The Myth of the Deflationary Death Spiral Monster 69

The Truth about Price Deflation 72

Fed-Lore Myth 2: Japan Proves that

Debt and Deflation Go Hand-in-Hand 77

Myth 3: The Keynesian Fed-Lore of the Phillips Curve 86

Myth 4: You Can Rely on Government Statistics 92

Myth 5: The Fed Was Created for Your Benefit 100

Notes 101

Chapter 5: The Bubble Reality Check 103

The Investor Reality Check 104

The Interest Rate Reality Check 110

The Teaser Rate on U.S. Debt--Reality Check 115

Banker Reality Check 119

The China Reality Check 127

Washington’s Addiction to Debt--Reality Check 134

Notes 140

Chapter 6: The End of an Empire 141

The End of a Monetary System 145

The Economic Laws of Debt 152

U.S. Debt--This Time It’s Different 153

Is Austerity a Bad Thing? 157

Where Will All the Money Go? 160

The Bell Is Ringing for the Bubble in the Bond Market 163

Banana Ben to the Rescue 167

The Cost of an Empire 169

Notes 173

Chapter 7: Real World Europe 175

The Creation of the Euro 176

Greece 183

Dr. Hayek vs. Dr. Keynes 190

Dr. Keynes and Dr. Hayek and

America’s Bout with Hyperinflation 195

I’ll Take Currency Debasement for $40 Billion . . . a Month 200

Final Jeopardy 203

The Canary in the Coal Mine 204

Notes 205

Chapter 8: The Debt Crisis 207

From Pioneer to Penurious . . . 207

The Sixteenth Amendment . . . The Beginning of the Slippery Slope 209

Mexican Debt Crisis 215

The Asian Contagion 218

Russian Debt Crisis 220

The Debt Crisis Fallout 223

What Would It Look Like Here? 225

It Can’t Happen Here? 233

I Don’t Want to Be Right 238

Conclusion 247

Notes 248

Chapter 9: What Can the Government Do to Mollify the Debt Collapse? 251

The Principles of a Free Market 252

Solution 1: Allow the Deleveraging Process to Happen 257

Solution 2: Strengthen and Stabilize the U.S. Dollar 260

Solution 3: Allow Interest Rates to Rise to the Supply of Savings versus the Demand for Money 262

Solution 4: Balance the Budget 264

Solution 5: Aggressively Reduce the Amount Of Regulatory Burden 270

Solution 6: Simplify the Tax Code 273

Solution 7: Fair Trade and a Free Trade 276

Solution 8: Overhaul Education 277

Conclusion 278

Notes 283

Chapter 10: How to Invest Your Money Before and After the Bond Bubble Bursts 285

What to Own When U.S. Debt and the Dollar Collapse 289

Notes 294

About the Author 295

Index 297