Tag: Debt crisis

Exponential U.S. Debt – How Much Will It Cost YOU?

From Peter Reagan for Birch Gold Group

As much as we tried to convey the fact that excessive national debt isn’t going to promote anything close to sustainable economic growth a couple of weeks ago…

The debt picture is apparently a lot darker than we originally thought.

Turning to a recent Daily Reckoning article, we can see that at the present rate of debt accumulation the debt would reach a total of $50 trillion in less than five years:

Under present acceleration $50 trillion debt is 4.27 years distant. You will have it in Anno Domini 2028.

At the projected rate 2028’s gross domestic product would come in at $29 trillion – approximately. Thus the nation’s debt-to-GDP ratio would scale an economy-murdering 172%.

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NOTHING IS FOREVER

Guest Post by John Mauldin

Nothing is forever, not even debt.

Every borrower eventually either repays what they owe, or defaults. Lenders may or may not have remedies. But one way or another, the debt goes away.

One of Western civilization’s largest problems is we’ve convinced ourselves debt can be permanent. We don’t use that specific word, of course, but it’s what we do and is why government debt keeps rising. We borrow faster than we repay previous borrowing—and I mean governments everywhere, China as well as the US.

Our leaders have no real plan to reduce the debt, much less eliminate it. They just want to spend, spend, spend forevermore. And most citizens are okay with that. As I will note below, the Republican Party I grew up with, which back then seemed to constantly talk about deficits and debt, is now comfortable with 5% (and growing) of GDP deficits.

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America’s Top Cities Swamped In Debt, Chicago Leads The Way

Via ZeroHedge

Taxpayers in America’s ten biggest cities face an average per taxpayer burden of $50,000 in debt incurred by the county, state and or “off-balance-sheet” transactions by city government entities, according to Truth in Accounting (TIA).

The taxpayer burden, TIA explains, is the amount residents would have to pay to cover all of a government’s debt. “When the unfunded debt of these underlying government units is combined with the county, municipal, and state debt, city taxpayers are on the hook for much more than they think,” according to TIA.

The cities are ranked from top to bottom, on net position, explained Bill Bergman, director of research for TIA. “And it’s on that basis that Chicago ranks dead last,” he said.

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Debt Alarm Ringing

Guest Post by John Mauldin

Is debt good or bad? The answer is “Yes.”

Debt is future spending pulled forward in time. It lets you buy something now for which you otherwise don’t have cash available yet. Whether it’s wise or not depends on what you buy. Debt to educate yourself so you can get a better job may be a good idea. Borrowing money to finance your vacation? Probably not.

Unfortunately, many people, businesses, and governments borrow because they can, which for many is possible only because central banks made it so cheap in the last decade. It was rational in that respect but is growing less so as the central banks tighten their policies.

Earlier this year, I wrote a series of articles (synopsis and links here) predicting a debt “train wreck” and eventual liquidation—an event I dubbed The Great Reset. I estimated we have another year or two before the crisis becomes evident.

That’s still my expectation… but I’m beginning to wonder again. Several recent events tell me the reckoning could be closer than I thought just a few months ago. Today, we’ll review those and end with a few suggestions on how to prepare.

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Credit-Driven Train Crash, Part 2

Authored by John Mauldin via MauldinEconomics.com,

Today we will summarize something I’ve been thinking about for a long time. Exactly how will we get from the credit crisis, which I think is coming in the next 12–18 months, to what I call the Great Reset, when the global debt will be “rationalized” via some form of nonpayment. Whatever you want to call it, I think a worldwide debt default is likely in the next 10–12 years.

https://www.zerohedge.com/sites/default/files/inline-images/2018-05-21_10-40-50.jpg?itok=Zq1VAhxA

I began this tale last week in Credit-Driven Train Crash, Part 1. Today is Part 2 of a yet-undetermined number of installments. We may break away for a week or two if other events intrude, but I will keep coming back to this. It has many threads to explore. I’m going to talk about my expectations given today’s reality, without the prophetically inconvenient practice of predicting actual dates.

Also, while I think this is the probable path, it’s not locked in stone. Later in this series, I’ll describe how we might avoid the rather difficult circumstances I foresee. While it is difficult now to imagine cooperation between the developed world’s various factions, it has happened before. There are countries like Switzerland that have avoided war and economic catastrophe. We’ll hope our better angels prevail while taking a somber look at the more probable.

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A Liquidity Crisis of Biblical Proportions Is Upon Us

GUEST POST BY JOHN MAULDIN

Last week, I mentioned an insightful comment my friend Peter Boockvar—CIO of Bleakley Advisory Group—made at dinner in New York: “We now have credit cycles instead of economic cycles.”

That one sentence provoked numerous phone calls and emails, all seeking elaboration. What did Peter mean by that statement?

In an old-style economic cycle, recessions triggered bear markets. Economic contraction slowed consumer spending, corporate earnings fell, and stock prices dropped. That’s not how it works when the credit cycle is in control.

Lower asset prices aren’t the result of a recession. They cause the recession. That’s because access to credit drives consumer spending and business investment.

Take it away and they decline. Recession follows.

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The Coming European Revoluition

Guest Post by

European Revolutionary Cycle

SovDebtCrisis-Wave-86D

I have warned that 2017 will be the political year from hell. What I am illustrating here is the link between a sovereign debt crisis and the Revolutionary Cycle. In 1933, Roosevelt came to power in the USA and turned the country toward socialism. That same year, 1933, brought Hitler and Mao to power. So 1934 was the revolutionary year. Such revolutions do not always bring blood in the streets. The next one is due in 2020 and we should see the system we currently live under go completely upside-down.

The revolutions of 1848 were essentially a democratic movement and an uprising against the political elite. In 1848, Karl Marx published “The Communist Manifesto” with Friedrich Engels, and was exiled to London as a result. In London, where he lived the remainder of his life, he wrote the first volume of “Das Kapital”. This undoubtedly influenced the revolutions that opened the door to communism/socialism. This also inspired the collapse of the old feudal structures and created independent national states. The revolutionary wave began in France in February 1848 when the French monarchy was overthrown. Communism actually began in France as a “commune” where people lived in one shared community with no individual property rights. It was the French who convinced Marx that communism would work better than just socialism, which he had advocated initially.

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USA Losing Sovereignty to World Fiscal Mismanagement

Guest Post by

Dollar Burning

The IMF and many economists (domestic and foreign) are now warning that a rate hike by the U.S. Federal Reserve, no matter when, will spark a major economic crisis in the emerging markets. They see this crisis being ripe for countries with high budget deficits, such as Turkey, as well as commodity-based economies. This includes the oil exporters such as Russia and even Saudi Arabia who has now begun to issue debt.

This is holding the Federal Reserve’s feet to the fire to the point that they are losing control of their own domestic policy objectives as a consequence of the dollar becoming the WORLD’S ONLY RESERVE CURRENCY no matter what the IMF inserts into the SDR. The emerging economies have issued debt worth nearly half that of the USA without the economic strength to back up that debt. True, there is going to be a debt explosion by 2017 and this is not going to look very nice at the end of the day. Clearly, the Fed is being pressured externally to give up its domestic policy objectives to help the debt burden of everyone else. And people keep saying the dollar will go into hyperinflation? Obviously, they do not understand the world economy or that what is taking place is OUTSIDE of the United States. Sorry, the dollar is not quite ready to burn to ashes.

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Sovereign Debts: How Defaults May Unfold

Guest Post by

Germany_bonds

In the Middle East, the banks are trying to convince the Gulf States to begin issuing debt even if there is no need to borrow, simply so they have a market to trade. Governments should never listen to bankers for this always becomes a conflict of interest with respect to national debts. The sooner government wakes up to the Sovereign Debt Crisis, the soon their particular country will be saved.

When you say we are entering a “Sovereign Debt Crisis”, people automatically assume that debt will just default. Governments NEVER like to admit a mistake, so an outright default may be limited to the emerging markets the further you move away from the core economies. What may also take place is the mandatory conversion of debt extending the maturity. You may buy 90-day paper and suddenly wake up to find that the government has converted 90-day paper into 10-year bonds. Always remember, they have the tanks and guns — never forget whom you are dealing with.

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