An important macro look at the state of total debt and its impact on our financial markets. It’s a quick read and I highly recommend it. The World on the Verge of Another Financial Crisis.
Most people don’t comprehend that we are living in a protracted debt crisis with no possible solution, because the majority of money (about 98 per cent) in today’s economies in the U.S., the U.K., Canada and Europe is debt-money, primarily generated by private banks when they issue loans. The problem is that the sum total of these debts—which can never be repaid no matter how much the economy grows
I couldn’t agree more. The problem is, this debt has spread though every level and every sector of our economy. Including our financial markets. And there lies the problem. Over the last few decades this debt explosion has been used to propel our economy and markets higher. Unfortunately, the velocity of credit is now slowing down or non existent. With interest rates close to zero, there is very little the FED can do now. QE or not.
That means we are at a point of inflection. We either let this debt collapse and liquidate through a deflationary depression -OR- it will be inflated away. One thing is certain, whichever scenario plays out, it’s not going to be a pretty picture.
