The bursting of the bond bubble has begun. As I’ve outlined previously the primary concern for Central Banks is the bond bubble. CNBC and other financial media focus on stocks because the asset class is more volatile and so makes for better content, but the foundation of the financial system is bonds. And bonds are THE focus for Central Banks.

In the simplest of terms, the world is awash in too much debt. The bond bubble was close to $80 trillion in size going into 2008. The Central Banks had a choice to either let the defaults hit and clear out the garbage debt from the financial system or attempt to inflate the debts away. They chose to attempt to inflate the debts away. Put differently, all of their policies were aimed at containing debt deflation… or the process through which debt becomes less and less serviceable leading to eventual insolvency and default. FULL REPORT