Ron Paul Warns America: ‘Biggest Bond Bubble in History’ Set to Burst

Ron Paul, the former Republican Congressman from Texas, has warned that the global economy is inching towards the era of negative interest rates, and that the United States will not be an exception.

The entire global financial system is threatened because of the trend to move towards total negative rates in the hope that it will save the world economy.

Paul, a well-known libertarian and a former presidential candidate, told CNBC’s “Futures Now” that the United States will join the global march towards negative interest rates believing that it will revive growth.

He pointed out that historically the global economy has never had so many currencies with negative interest rates.

Bonds worth more than $17 trillion are currently in negative rates, which is unprecedented. According to Paul, this is nothing but a bubble. “So, we are in the biggest bond bubble in history, and it’s going to burst,” he ominously announced on CNBC.

Paul, who is known for stock market bubble forecasts and other economic warnings, believes that the Fed’s policies are ineffective in this kind of an environment. While the Fed is expected to cut rates by a quarter of a point at its forthcoming meeting, this may not be the answer to the looming economic peril.

It is impossible to predict where the credit creation goes, says Paul. Quantitative easing (QE) leads to inflation, and each time you create new credit by lowering interest rates below the market levels, the bubble gets bigger.

Paul has been warning for years that a stock market shock of more than a 50 percent drop in prices is waiting to happen. Now that the negative interest yielding bonds are in the spotlight, the risks have heightened.


However, even now, it is difficult to determine the timing of a meltdown because lower taxes in America have helped push the U.S. economy to higher growth rates.

But Paul is convinced that it will happen. His argument is hard to challenge: “How do you sell a bond that pays a negative rate?”

Just a few days ago, former Fed Chairman Alan Greenspan had echoed exactly the same sentiment as Paul about negative interest rates.

Greenspan said that he will not be surprised if U.S. bond yields turn negative very soon. In fact, that sentiment seems to be widely held across the central banking circles.

In the global economic terms, a year is a long time. Just last October, Paul had expressed his worries about the other extreme — when yields on the 10-year Treasury note zoomed to multi-year highs at 3.26%, causing jitters about inflation.

‘Biggest bubble’

Paul spoke on the same “Futures Now” CNBC program last October that when the currency is inflated, interest rates are distorted and consumer over-spending becomes the norm a forced economic adjustment will occur.

He used that scenario to declare at that time, “We have the biggest bubble in the history of mankind.”

But on Friday, the benchmark 10-year Treasury note yield closed at 1.9%.

So why is Paul again warning about an economic catastrophe when the rates are no longer above 3%?

Paul argues that when central banks lower the interest rates to the extremes, the financial market pricing mechanism gets thwarted.

“I don’t think anything even existed coming close to what we’re facing today,” Paul said.

Test Your Financial Advisor’s Loyalty with These Simple Questions

You have a financial advisor in order to make certain you have budgeted your money correctly, have planned for future financial needs, and, in some cases, to turn some of

Sell Puts the Smart Way: Get Out Before Expiration Nears

Selling put options can be a great way to help increase the value of your portfolio without taking on too much risk. At its core, a put sale allows investors


4 Pros and 1 Con of Refinancing Your Home

Two years ago the 30-year fixed mortgage rate was 4.6%. Today it is 2.9%. If your mortgage is in the high threes, you should consider refinancing. Refinancing would lower your

Easy Finance Tip: How to Calculate Your Net Worth

To calculate your net worth, just subtract your liabilities (what you owe) from your assets (what you own). While the equation is simple, it's important to get a snapshot of

Just a Few Bad Market Years Can Slam Your Retirement: How to Cut Your Risk

I believe one very underappreciated risk for investors preparing for retirement is the concept of “sequence of returns.” Sequence of return risk is the danger that the timing of withdrawals

Tai Chi Can Benefits for Those with Chronic Diseases

The Chinese martial art of tai chi can be beneficial to people suffering with chronic illnesses, according to research in the British Journal of Sports Medicine (2015), conducted by Dr.

Two Measures of Options Volatility That Matter

Most people often have a notion of what volatility means. They understand, at least conceptually, that it has to do with data of situations that vary over time. Weather is

3 Financial Habits to Adopt Before You Retire

Nobody wants to work until the day they die. We all want to get to a point where we can simply sit down, relax, and enjoy life.  Consider adopting these

11 Ways Eating Limes Can Protect Your Eyes, Heart, Joints and More

Most of us hear lime and think Corona beer or ceviche. Surprisingly, this little bright green fruit has many excellent benefits for your health and wellness. Limes are often overlooked

Why You Should Take Social Security Early and Invest

Social Security is a government program, so it is unnecessarily complicated. Working or retired? Married or divorced or both? Disabled? Private or public employer? All these factors affect your Social

5 Benefits of Opening a Health Savings Account

The tax advantages of a healthcare savings account are like those of a traditional IRA, a Roth IRA, or a 529 college savings plan. The account can be used like

A Simple, Easy Way to Lower Your Blood Pressure

According to the American Diabetes Association, one in three Americans have high blood pressure, and this condition may lead to other chronic diseases like heart disease and diabetes. There are