A Financial New World Order Has Arrived

Andy Snyder|October 13, 2022

Forget calling for a new world order… It’s already here.

Dig deep enough through the conspiracy theories – or listen long enough to the ignorance of some of the folks in charge – and you’ll see a yearning for a new global currency.

We need something that puts all countries on an equal footing, they say.

It’s a laughable view held mostly by the losers in today’s economic tug of war.

But despite their lack of strength and economic knowledge, they’re getting their way.

Few folks are talking about it, but the world’s sovereign bond markets are marching in lockstep in a way that we haven’t seen for a very long time.

Correlations between the world’s most popular sovereign debt markets are at levels we haven’t seen in decades. They’re currently above 0.8. That’s sky-high – as much as four times higher than they were just a year ago.

It means when England goofs… America pays the bill. When Japan devalues its currency, Germans see their cost of money surge.

It’s not good. The textbooks say this shouldn’t happen.

Then again, the textbooks say bonds and stocks shouldn’t move in sync, either… but they just did for the third straight quarter. It’s a worrisome trend that blows traditional asset allocation out of the water.

The trouble in bonds is especially concerning when the Bank of England is having to bail out its market… or when the folks in Switzerland are begging for mercy from their painful debt mess (we just sent them $3.1 billion to help smooth things over).

As we’ve said so many times before, the Fed has gotten its foot in a trap – a rusty bear trap that will take serious gnawing to free its leg from. What’s worse, though, is that the rest of the world hasn’t meandered on by. They’re stuck too… stuck staring at the gruesome sight of the world’s economic leader unable to move.

It’s trouble.

What’s the Big Deal

On a recent video call with our paid subscribers, we were asked about the liquidity crisis. Somebody wanted to know if we thought it was a big deal – or if it was going to become a big deal.

Our answer was nuanced. It always is.

It’s not liquidity that’s the issue. America has $31 trillion in debt out there. There’s more than enough for anybody who wants a piece of it. We’ve got enough for the fish and the deer too – and maybe even the Martians.

The problem isn’t liquidity. The problem is demand.

Remember, the Federal Reserve has been a big buyer in the market for years. Powell and his troops have moved out, though. And few folks want a 10-year Treasury that yields 3.9% when inflation is at 8%… and when the note’s value hinges on what the rookies in England are up to.

It’s the problem with big, sustained moves like this.

It’s not the beginning or the end that’s the trouble. It’s the middle.

If rates are going to go to, say, 6%, why do we want bonds that yield just 4%? They’ll be worth less in no time.

Again, that’s the problem. It’s not because the market is dysfunctional or broken. It’s that folks know things are going to be different in very short order. The Fed has told them so. Rates will continue to rise… so why not wait it out?

Until correlations break, it will remain a global problem.

The small and the weak won’t do well. They can’t afford to wait and watch the Fed gnaw its foot out of the trap.

That’s why Washington is already intervening.

The conspiracy theories don’t need a villain. Bill Gates, Klaus Schwab and all their World Economic Forum pals are off the hook. They don’t need to create a secret new system.

Thanks to decades of bad decisions… the system is creating itself.