Can anyone or group actually control the prices of hundreds of trillions of dollars worth of debt? If not, is there a point where rates rise (debt value falls) enough to trigger a stampede, and to what would people run?
Am I missing something in the following? Since the bond market low of 1981 bondholders couldn't get enough debt. Prices for intangible assets clearly do not obey supply-demand pricing. As prices for debt rose, the amount issued EXPLODED. Congress discovered it could spend without limit and cut taxes, too.
All that borrowed spending artificially stimulated industries like medical services (and much else) growing GDP for each dollar spent even as the debt issued (as a bond) was an additional asset---a 2nd dollar--in wealth created. As borrow-to-spend "grew" the economy, any savings it produced among the employed appears to mostly be recycled back into BOND MARKET DEMAND. In this regard, it looks to me like a standard Ponzi scheme.
Every uptick in rates (since they bottomed two years ago) ripples through the value of existing debt, destroying "wealth" on a massive scale. If there's a "Minsky Moment," and people try to exit bond positions en masse won't that be a cataclysm compared to whatever happens in the stock market, which is far smaller?
I think of debt (liabilities in general) as a vast, inverted pyramid, with long-term debt, high yield corporates and pensions on the wide top, and as you go down the narrowing pyramid are debts of ever-shorter duration, until you get to the second-to-the-last layer, bank accounts, followed by the final point, which is the only "money" in our system that exists in physical form: Banknotes. If people flee debt, my guess is that this inverted pyramid will evaporate from the top down. Pensions and long-term debt will be crushed, then medium term debt, then short term debt, then (maybe) bank accounts... could cash be the last dollar-based claim on money left standing?