Can Bond Markets predict a World War?

r
renqiulan
楼主 (文学城)

Nial Ferguson, a seasoned historian, always tirelessly reminds everyone of every important history lesson that's not well learned. I can still hear him screaming from his book (The War of the World): "When will they ever learn?"

 

 

 "When will they ever learn?" Let me forward this question to the bond market which, in America alone, is currently worth $53 trillion (according to Learnbond.com).


Size matters.

 

 

Government bond traders, needless to say, have feelers for war and peace, in which they have a financial stake. Readers of Mao Dun's Midnight ( 茅盾《子夜》) must recall the Shanghai bond market's crazy ups and downs in response to China's political volatility. Shanghai was---and probably still is---a playground for wheeler-dealers.

 

 

 

What about London and New York? Both markets have never run short of wheeler-dealers, of course. Interestingly, though, it's hard to find a worried bond trader in the early 1910s, as both markets contemplated no outbreak of the First World War even on the eve of August 1, 1914 (the day when Germany declared war on Russia).


It's unlikely that a few big players in the bond market could have conspired to hide bad news from the world. In all likelihood, as attested by the pre-WWI records, London's most powerful financiers, such as the Rothschilds, truly believed that the bond market just needed to iron out some wrinkles. They had no idea that the Great War was already around the corner. Because of their own over-optimistic forecast, they ended up losing almost half of their wealth. 

"Once bitten, twice shy." This idiom, however, didn't apply to European traders.

In 1938, bond values still held up fairly well in the Swiss market, thanks to the unwavering commitment of the United States to the Trans-Atlantic trade. It's business as usual even after the fact that Hitler invaded Poland on September 1, 1939, which touched off the Second World War.

Echoing public sentiment, the bond market regarded the initial 8-month lull on the Western Front as a good bet that WWII was, after all, a phoney world war. WWII was not phoney. The West had simply lulled itself into a false sense of security. That's why the Third Republic of France sank into oblivion while Hitler's troops were parading through the Arc de Triomphe on June 14, 1940.

How come the bond market in the West woke up so late when a world war was about to erupt? Also, how come the leading news outlets of those times turned out to be equally clueless?

With the benefit of hindsight, it's quite clear to us that the two world wars were each preceded by escalating conflicts between and among the great powers. Still, who or what could have turned the bond market into such a Titanic, not once but twice?

I don't profess to know the answer. But I would venture to say the following:

Given all the geological fault lines, it remains difficult, if not impossible, to predict exactly when a super-earthquake will happen --- likewise for a world war, given all the geopolitical fault lines. This being the case, we might want to have our guard up, particularly if the market smells like roses when it's not supposed to.

Be a cat, so as to smell a rat.


Author: renqiulan


(The above images come from Google.)

 

🔥 最新回帖

r
renqiulan
110 楼
more optimistic view of our economy going forward.
r
renqiulan
109 楼
A rise in the 10 year-Treasury yield reflects a
r
renqiulan
108 楼
And Americans tend to have faith in America.
r
renqiulan
107 楼
小西, vice versa.
r
renqiulan
106 楼
A scam is a rat wearing perfume.

 

🛋️ 沙发板凳

盈盈一笑间
Per bloomberg news, the U.S. bond market crash is spreading.
r
renqiulan
Does it make sense to you?
盈盈一笑间
I read the news, and it says the collapse in bonds now ranks
盈盈一笑间
among the worst market crashes in history.
r
renqiulan
U.S.bonds are U.S. backed.
盈盈一笑间
The bond market broke down after FOMC meeting, per JPMorgan

 

r
renqiulan
Crash! That’s pretty eye-catching.
盈盈一笑间
Is it due to inflationary and high interest rate?
盈盈一笑间
BlackRock warns the worst US bond rout in history is far
盈盈一笑间
from over...
r
renqiulan
When America sneezes, the world catches cold. Does the world
r
renqiulan
catch cold? If not, why not?
r
renqiulan
We have to ask this basic question: why do we buy
r
renqiulan
U.S. savings bonds?
r
renqiulan
Do we still have faith in America? Do we still have faith in
盈盈一笑间
You wanna see the world in chaos?
r
renqiulan
ourselves? Right now, we are hearing a lot of noise---the
r
renqiulan
noise of a roller coaster. It happened before. It's
r
renqiulan
happening now. It'll happen again.
r
renqiulan
From history I have learned one thing. There's something
r
renqiulan
called "a rainbow of chaos." Chaos is part and parcel of
r
renqiulan
order. Let's check if we're living in this rainbow.
盈盈一笑间
For steady returns?
盈盈一笑间
Can you please elaborate on what you mean by "the noise"?
C
CBA7
A great book review with intriguing facts and deep thoughts!
C
CBA7
Very impressed facts: a Titanic, not once but twice!
C
CBA7
Will we get a 3rd one?!
盈盈一笑间
Disorder and unpredictability? We are in danger then.
r
renqiulan
The noise is the random, unwanted variation or fluctuation
r
renqiulan
that interferes with the signal.
r
renqiulan
The signal is the meaningful information that
r
renqiulan
you're actually trying to detect.
r
renqiulan
We are always in danger of some kind. But then,
r
renqiulan
danger and opportunity are yin and yang.
C
CBA7
geological fault lines VS geopolitical fault lines is like
盈盈一笑间
噪音,干扰人的正确判断。
C
CBA7
A super-earthquake VS A world war. Both make sense.
盈盈一笑间
危机 = 危险+ 机遇
r
renqiulan
Hi, 小西! It is a fact that history and money mix.
C
CBA7
Smart suggestions: if the market smells like roses when
C
CBA7
it's not supposed to. Be a cat, so as to smell a rat.
r
renqiulan
盈盈,你问得棒,太感谢了!胆敢一问,对茅盾的《子夜》,觉得甚样呢?
C
CBA7
谢谢秋兰分享好文好建议!
r
renqiulan
We Americans are born to take risks.
r
renqiulan
有小西你这位好读者,我惭愧自己不是个好作者。当然,因为不是个好作者,所以更要作下去。业精于勤嘛!
C
CBA7
Hi, 秋兰!Yes, money is anywhere and anytime in history :)
r
renqiulan
"Smell a rat." Pun intended. Haha!
盈盈一笑间
秋兰读过茅盾的《子夜》?!真是被惊到了!非常棒的的联想。茅盾笔下描写了各种复杂的社会矛盾。确实和当前时政有某些类似之处。
C
CBA7
哈哈哈,秋兰小心发胖,因为谦虚使人发月半 :)从盈盈那儿学来的,现学现用,哈哈哈。
r
renqiulan
Actually, we humans are born to take risks. Americans are
r
renqiulan
human enough.
r
renqiulan
Getting fat and lazy? Not so fast. Hey, I'm a runner.
C
CBA7
Hahaha, pun is so much fun!
r
renqiulan
I may not run fast, but I keep running.
盈盈一笑间
又看了一遍你的帖子。目前美国债券市场崩盘,会重演过去的历史,像以前一样成为战争的预兆吗?
r
renqiulan
I beat the legendary hare lately. Yeah!
r
renqiulan
You're rhyming.
C
CBA7
Good for you!
方外居士
A bigger earthquake in financial system may lead to a war?
r
renqiulan
As long as we don't rest on our laurels, we'll be OK.
盈盈一笑间
哈哈,中国有龟兔赛跑的故事,秋兰读过吗?原来你是那位胜利者。LOL
C
CBA7
Awsome, congratulations!
r
renqiulan
RMS Titanic sank because of its owner's hubris.
盈盈一笑间
Bravo !
盈盈一笑间
哈哈。晚安小西,晚安秋兰,晚安美坛 ~ ~
C
CBA7
You were too: a cat smells a rat!
r
renqiulan
盈盈,你的直觉认为会吗?
盈盈一笑间
That's my question too.
盈盈一笑间
俄乌战争,以色列现在的局势,确实让人不安。。但我仍愿意祈祷世界和平。。
r
renqiulan
茅盾的《子夜》,很有左拉《金钱》的影子。茅盾写得最好的,个人觉得是《腐蚀》,其次是《春蚕》。
C
CBA7
盈盈辛苦了,晚安, sweet dreams ~ ~ ~
盈盈一笑间
我只读过茅盾的短篇。秋兰,你读过的中文书,可能比很多中国人还多。佩服!
C
CBA7
Sounds good.
r
renqiulan
在日常生活里,个人感觉不到有普遍性的恐慌。
r
renqiulan
让我第一时间摘掉高帽子。自问爱书,爱读书,虽然读得少。
r
renqiulan
盈盈晚安!你的勤奋,令我佩服不已。
r
renqiulan
这方面的“国情”,不大熟悉。只知道澳门逸园赛狗,用的是电兔。较喜欢卖电池广告的那个打鼓的电兔。
r
renqiulan
Time will tell. Thank you, 方外居士!
r
renqiulan
小西,thanks for providing me with food for thought! Goodnight.
O
Oona
I am reading and it would take me a while :-)
盈盈一笑间
噗~~高帽子?你也知道这个词?LOL
盈盈一笑间
同意
盈盈一笑间
谢谢楼上二位。酒逢知己千杯少。不辛苦。my pleasure ~~
盈盈一笑间
卡哇伊~~
盈盈一笑间
我昨天也是反复看了几遍。不好懂。秋兰文章,深邃,有文化底蕴。:)
C
CBA7
Good morning, 秋兰, we're learning a lot from you. Thank you!
唐宋韵
I agree with you. I invest significant percentage on gold..
r
renqiulan
Oona, you are truly appreciated!
r
renqiulan
谢谢盈盈!文化底蕴谈不上,拙文还有无限的改进空间。
r
renqiulan
Seize the day. Seize the golden opportunity. Hi, 唐宋韵!
r
renqiulan
小说里有不少生活常用词汇,算是学了点点滴滴。
r
renqiulan
当然,“于无声处听惊雷”,不能排除个別人士先知先觉,先天下之优而忧的。
r
renqiulan
Encore!
r
renqiulan
...
r
renqiulan
Whenever we add value to something, we also expect
r
renqiulan
some profit in return.
r
renqiulan
Shells could be money, if you will. Money is currency.