David Burton questions the strength of the world bond markets.

The history of debt
As discussed in my articles in previous issues of YTE, the idea of debt stems from the Babylonian economic system of more than 4000 years ago, around 2000 BC. Instead of coins, the Babylonians used clay tablets representing the promise to pay. Money was borrowed when it was needed for critical items to survive, as opposed to today’s tendency for people to borrow for ‘wants’. Borrowing for wants can cause issues and result in significant financial loss, as the items being purchased – a Porsche, sound systems, phones and so on – usually depreciate rapidly, resulting in debt and losses.

In the Babylonian system, farmers would borrow for seed for next year’s crop, if they had had a previous failure. They were forced to go to the priests for a loan. The priest would lend the farmer, say, 10 talents with the condition that he should repay 11, thus charging 10 per cent ‘interest’. The farmer himself and his land, wife, and children were used as collateral. When the farmer couldn’t repay 11 talents, as there were only 10 in circulation, he defaulted and the lender would take his land and cattle, and sell his wife and children to slavery. At this time, most slavery came from debt. Today much is the same (with the exception of slavery); many farmers are trapped in their debts to banks, with very few farmers being debt free.

The creation of money
Money is created out of nothing. Over the centuries, coins and bullion were used. They became too awkward to deal with, so the people who stored them (smiths and smelters) issued paper receipts instead (now called IOUs).

Only 10 per cent of the value of what was stored was being used at any one time, so lenders began to lend more than they had, and the banking system was formed. Paper money, called ‘fiat currency’, has been used for hundreds of years. History shows that this lending system is cyclic and has always ended badly, with a complete debasement of the value of the currency, similar to what is now happening to the US dollar.

Banks have been lending up to 100 per cent of the value on some assets. This is doomed to fail. There is no real money; it’s only a computer entry from one account to another. If everyone went to the banks to draw out their cash – what’s known as a run – the banks would fail. Of course, only the people with no debt and term deposits can draw out all the money, the rest can’t, which leaves 98 per cent stuck, and two per cent with the cash.

The matrix of money
The matrix of money works like this. The government prints a $100 note for six cents and sells it to the bank for, say, four per cent, which is $4.00 on $100 or a 6,666 per cent return. Then the banks lend it out to, say, a credit card at 19 per cent or $19 on $100. This is a 31,666 per cent return on six cents. It gets worse, as the banks have been lending out around the world, one hundred, two hundred, who knows, maybe five hundred times the $100 on deposit.

If you lend $100 out, say, 100 times, it is the same as lending $10,000. At 10 per cent interest, that’s $1000 a year. Now, six cents into $1000 is a 1,666,666 per cent return. If it’s 500 times, rather than 100 times, then it is 8.3 million percent. Of course, they aren’t printing fresh money each year to replace the original $100, so if the original money lasts for 10 years, this works out at a 16 million per cent return. If the rate of interest is 19 per cent, as on credit cards, there is a 31 million per cent return over 10 years.

For this system to work, the bank relies on you staying in debt and paying interest. When people don’t want to borrow, or pull their money out of the bank, as in the Great Depression, the system collapses; or if everyone wanted to pay off their debt at the same time, it would collapse.

And this is what is going to happen, because the mathematics of money just can’t work – and the next great depression will prove this to be correct. Not everyone can pay off their debts, because there is more debt than paper money in circulation. Only two per cent of people can do so.

It’s your call
Do you want to be in the two per cent or the 98 per cent? If you are in the 98 per cent, it will be the banks’ call.

Money is created for people to work for wages. Look how much work is done by the masses for six cents. Look how much debt you can get them into for six cents. What a brilliant system has been created! In my opinion this is an issue of control, with an unquestioning docile public (distracted and struggling) without the means, energy or opportunity to scrutinise their governments and banks too closely.

The bond market
Most traders are aware of bond futures. The index is based on 100 being zero per cent and zero being 100 per cent interest rates. In the 1980s, bonds were down to about 84, or 16 per cent (100 – 84 = 16). Because debt and death are ruled by the eighth house, Scorpio, Saturn in this house will prove that there’s not enough money to borrow and force rates to be extremely high. Rates in the United States were as high as 145 per cent in the 1890s; in New Zealand in 1986 they were 30 per cent.

If you have debt, get out of it. If you can’t, lock your rates in for the long term and save your money. In my opinion, high rates of interest will cause the stock market to collapse, and real estate will not fare much better, also collapsing. Saturn squares Pluto in Capricorn opposite the house of real estate, Cancer. I see no light in real estate until about 2022.

The Australian birth chart
Australia was ‘born’ just after midnight on 1 January 1901. Australia is called the ‘Lucky Country’ because it has Libra rising, and Venus, being the significator, is placed in the second house of money. It doesn’t get much better than that.

Transiting Pluto is going to conjunct natal Saturn and Sun at the end of 2012, then move into the fourth house of real estate. That is when the big collapse will start. There’s no doubt that first home buyers will become the first home sellers. Prices should fall about 80 per cent before the downturn bottoms by 2020.

David Burton has been studying and using financial astrology and the methods of WD Gann since 1980. Visit www.schoolofgann.com and www.commhedge.com.au or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it for more information. Coming soon: www.corporateastrologers.com. AFSL No: 241371

This article was originally published in the Mar/Apr 2010 issue of YourTradingEdge magazine. All rights reserved. © Copyright 2011, Your Media Edge Pty Ltd. 
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