The Central Banks Will Ignite a Massive Crypto Rally in October

The Central Banks Will Ignite a Massive Crypto Rally in October

Would you accept real estate as collateral for a loan if the value of the real estate went down every year?

Of course not.

But people are doing this right now with long-term bonds. They think their long-term bonds are capital preservation assets. But they’re horribly wrong.

The U.S. government is sitting on over $37 trillion in debt. And the public owns 80% of it, mostly through government bonds.

If you’re an older American like me who’s at or near retirement, most financial advisors recommend you allocate 60% of your portfolio to bonds.

Even if you don’t own any government debt directly, you’re likely exposed to it through your mutual funds or retirement accounts.

Here’s the problem with holding long-term government bonds either individually or through some investment vehicle: The interest you receive is lower than the pace of “currency rot.”

You see, bonds generally pay an interest rate that accounts for inflation. Typically, the yield is three percentage points above the inflation rate.

That means if inflation is running at 2.9% (which is the current core CPI rate), the 10-year U.S. Treasury bonds would normally pay 5.9% in interest.

On Wednesday, The Federal Reserve cut interest rates by 25 basis points. That dropped the benchmark 10-year note yield to around 4%.

When you factor in the current pace of inflation, investors in 10-year bonds are generating “real” returns of 1.1%. And when you account for taxes, they’re almost guaranteed to lose money over time.

That’s why gold is on track to have its best year since 1979. And when gold rallies, bitcoin follows.

The Central Banks Are Sounding the Alarm