It’s Not a Matter of If But When the Debt Bubble Pops
If something cannot go on forever, it will stop.
This seems self-evident, but as Jim Rickards noted in a recent article about the ever-growing levels of debt, people tend to ignore this indisputable truth.
Total global debt reached a record of over $250 trillion in the first half of 2019, according to an Institute of International Finance report published in November. Global debt surged by $7.5 trillion through the first half of the year. “With no sign of a slowdown, we expect the global debt load to exceed $255 trillion in 2019, largely driven by the US and China.”
According to SRSrocco, global debt has added $100 trillion in debt since the 2008 financial crisis
Now, the majority of that debt went into the Stock, Bond, and Real Estate Markets. This is precisely why the US stock market has reached an all-time new high. Unfortunately, when the US and the global economy finally enters into a recession-depression, the asset values will crash while the debts remain.”
In last week’s Friday Gold Wrap, Mike Maharrey included debt as one of the five big news stories that drove the gold market in 2019. Corporate, government and consumer debt have all pushed to record levels, enabled by loose central bank policy.
Rickard focused on government debt, saying we’re on “the knife-edge of a debt crisis.”
Just consider the US. The 2019 budget deficit came in at just a hair under $1 trillion. That’s the kind of deficit spending you would expect to see in the midst of a major recession. The national debt surged past $23 trillion this year and that doesn’t factor in unfunded liabilities. And the spending shows no signs of slowing down. The deficit through the first two months of fiscal 2020 was 12% bigger than the same period in FY2019.
Other countries are in the same boat. Rickards said, “Current global debt levels are simply not sustainable.”