If we had not taken more than 9 trillion dollars of consumption and brought it into the present, we would most assuredly be in the midst of an epic economic depression right now. Here in the United States, more than 9 trillion dollars was added to the national debt during the Obama years. In recent years we have seen examples in Greece, Cyprus, Zimbabwe, Venezuela and various other European nations. The same thing happens on a national level. On an individual level, you could live like a Trump (at least for a while) by getting a whole bunch of credit cards and maxing all of them out.īut eventually a day of reckoning would come. It mystifies me that so many Americans seem to not understand this very basic principle. There is always a price to be paid for going into debt. On the other hand, if rates are too low (and credit as a % of GDP declines), then the system breaks down, as savers, pension funds and insurance companies become unable to earn a rate of return high enough to match and service their liabilities. If rates are too high (and credit as a % of GDP too high as well), then potential Lehman black swans can occur. But the credit creation has limits and the cost of credit (interest rates) must be carefully monitored so that borrowers (think subprime) can pay back the monthly servicing costs. Capitalism, with its adopted fractional reserve banking system, depends on credit expansion and the printing of additional reserves by central banks, which in turn are re-lent by private banks to create pizza stores, cell phones and a myriad of other products and business enterprises. Since 2007, China has added $24 trillion worth of debt to its collective balance sheet. ![]() In China, the ratio has more than doubled in the past decade to nearly 300%. In the U.S., credit of $65 trillion is roughly 350% of annual GDP and the ratio is rising. My lesson continued but the crux of it was that in 2017, the global economy has created more credit relative to GDP than that at the beginning of 2008’s disaster. ![]() The financial crisis of 2008 represented an opportunity to learn from our mistakes, but instead we just papered over our errors and cranked up the global debt creation machine to levels never seen before. Everything might seem fine for a while, but one day we are going to hit the wrong bump at the wrong time and the whole thing is going to go KA-BOOM. ![]() We are living during the greatest debt bubble in the history of the world, and our financial engineers have got to keep figuring out ways to keep it growing much faster than global GDP because if it ever stops growing it will burst and destroy the entire global financial system.īill Gross, one of the most highly respected financial minds on the entire planet, recently observed that “our highly levered financial system is like a truckload of nitro glycerin on a bumpy road”.Īnd he is precisely correct. The reason why I am sharing this example is to show you that it is literally impossible for all of this debt to ever be repaid. Of course global debt repayment will never actually be apportioned by family. So they should probably be excluded from these calculations entirely, and that would mean that your family’s share of the debt would ultimately be far, far higher. Considering the fact that more than 3 billion people around the world live on two dollars a day or less, the truth is that about half the planet would not be capable of contributing toward the repayment of our 152 trillion dollar debt at all. Very few families could write a check for that amount today, and we also must remember that we live in some of the wealthiest areas on the globe. So if you have a family of four, your family’s share of the global debt load would be $86,856. If you take 152 trillion dollars and divide it by the seven billion people living on the planet, you get $21,714, which would be the share of that debt for every man, woman and child in the world if it was divided up equally. Other estimates put that figure closer to 200 trillion dollars, but for the purposes of this article let’s use the more conservative number. In the words of Bond Legend Bill Gross, “Our highly levered financial system is like a truckload of nitro glycerin on a bumpy road”…įrom Michael Snyder, The Economic Collapse Blog:Īccording to the International Monetary Fund, global debt has grown to a staggering grand total of 152 trillion dollars.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |