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The "Sexy" Facts about Debt Markets
By: Chris Tell at http://capitalistexploits.at/
Like a bad case of hemorrhoids, debt is a topic too often left out of polite conversation. It's a good thing then that you don't come here for polite conversation. It is a topic previously written about in these pages and one which has the power to keep me awake at nights when I really ought to be doing other things.
In our quest to clearly understand debt around this ball of dirt we call home, how it impacts us, if it impacts us and what it all means we've had our team put together a comprehensive report on the topic. The report itself is completed and currently with a gentleman who takes our analytical work, adds some witchcraft and makes it look readable after I've finished with it. As soon as we receive this ergonomically designed masterpiece, readers will find it magically appear in their inbox. If you're not a subscriber then, for goodness sakes, sign up here NOW.
Littering my desktop like paper bags on a Nairobi highway are dozens of graphs, the remnants of this debt report. I thought therefore I'd take some of the scraps and provide readers with a short sampling of what is really a visual ice bath.
Earlier this year the Bank of International Settlements said in its annual report that debt ratios in the developed economies have grown by 20 percentage points to 275 percent of GDP since the beginning of the global financial crisis. Albeit not as severe, the trend is similar in the emerging economies where debt ratios have grown with the same pace to 175 percent of GDP, thanks to the spillover effect of central bankers in the developed world testing their limits with low interest rate policies.

The Bank warned that global debt levels could trigger another Lehman-style crisis, calling continued debt accumulation over successive business and financial cycles as the root (rather than the solution) of the problem.
The symptom, however, goes way back than just 2007. As you can see in the charts below (taken from the Wall Street Journal), both public and private debt levels have been expanding since the early 90s.


With interest rates trending downwards for the past 30 years and eventually hitting rock bottom in late 2008, it is no wonder that the global debt levels have swollen to 200 year highs. Yep, 200 year highs!

Although the chart above only shows the US rates, the situation is similar all across the globe.
It looks like the central bankers of the world have painted themselves into corner. Growing mountain of debt makes it harder for economies to grow at higher interest rates, hence forcing central banks into a downward spiral of record low rates and monetary stimulus that simply encourages more borrowing and worsening the underlying problem - what the BIS calls "a debt trap" where low rates essentially validate themselves.
Just a few weeks ago Spain, one of the Europe's ailing economies, issued a 50-year bond at a mere 4 percent rate. This is Spain for God's sake. They're broke!
There are some truly crushing debt burdens lurking in full view right here and now. Debts which cannot be repaid and will not be repaid!
Personally I tend to keep on top of this sort of information but I'll be honest with you when I say that what our analysts have put together scared even me, and here I was under the illusion that I was adequately informed. We believe it is vital for every investor to keep an eye on those markets.
Subscribers will have the report within the next few days. Sign up here if you're not subscribed already.
- Chris
"Blessed are the young for they shall inherit the national debt." - Herbert Hoover
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Debt is what happens when you don't manufacture and export; success is what happens when you do. Suicide is what happens when you commit "globalism".
British Empire lasted 200 years based on Sterling Fiat ----we still have a few years to go if we do not go bankrupt bailing out EU, Japan, and China thru US dollar fiat consumerism, and end wars in Syria, Iraq, Afghanistan, Ukraine, or start war with China or Russia. Perhaps time is running out quicker than we think.
most of those 200 years were based on gold-backed Sterling. in fact, Sir Isaac Newton fixed the gold backing in 1717, together with the silver conversion. yet the official gold backing had to wait for 1816. then 1914 WW1 started, and all national banks stopped the gold backing. afterwards, in 1925 Winston Churchill re-introduced a gold backing, though 1931 it ended, and the Sterlingzone was founded in 1932, which extended even to Finland and Denmark
then 1946 Bretton-Woods system until 1973. 1988 Maggie Tatcher's Chancellor Nigel Lawson decided to "shadow" the DEM. 1990 the Soros Shock, when the Pound lost 25% vs the USD and 15% vs the DEM. then various attempts to stay in the ERM followed
First there was a small poor Island Nation; then they got a lead on the rest of the world in the new technological manufacturing and exporting and prospered; also did a bit of economic colonialism. then they lost their advantage in manufacturing and exporting and became a small poor Island Nation again. The entire modern wealth miracle is based on manufacturing and exporting; they even have a tax named after it; Value Added Tax. The United States was sold to the wolves by it's own Capitalists; after they bought the congress and Silly Billy Clinton, (most favored nation status for China; I ask you !!). and it now in the prcess of becoming a rather large poor country with plenty of sub-normal tribal primitives added in to insure complete failure. Any further questions?
The coming Great Depression.
the Greater Depression? the Greatest Depression? the Greater Recession? the Greatest Recession? :-)
All countries/societies are trapped by
1. massive over population & low-quality population
2. #1 drives socialist policies that result in
A. massive expansion of private & public debt for direct & indirect entitlement program spending + cheap-credit for the proletariat masses who earn nothing or not enough to live without complaining to vote-hungry corrupt immoral politicians
B. cheap credit for businesses to "create jobs" for the overpopulation which they use for financial engineering instead because there is not enough economic growth to get any return on just investing in "jobs"
3. #1 & #2 result in politicians & economies being trapped into central bank imposed ZIRP, because financial markets & economies would crash immediately and hard under free-market interest rates.
4. Governments cannot pay the interest on their now immense accumulated debt at the free-market interest rates, all the politicians (includes central bankers) know this
Therefore, central banks will never voluntarily increase rates because that is exactly the same as pushing the crash button.
But an exogenous event will crash the financial markets eventually. Then there will be a crushing depression.
i love crushing depressions. everybody starts with a clean slate. oh wait. the elites have secret stashes of gold. how?
I'm not sure even during a crushing depression gold will be appealing to starving masses. You know what will skyrocket in valuet though? Drugs. Especially painkillers and appetite-supressing stimulants. I'd feel more confident with a stash of oxy's, xanax, and meth than gold. So you might want to keep that old bottle of percocets you forgot about, it might be worth a whole ounce of gold when SHTF.
All debt capital will be returned, but, only once it's been rendered worthless with issuance of even greater debt.
It's essentially been the same scam everywhere for a long time.
I remember 30 years ago, during the Latin American debt crisis, when a guy in Brazil explained it to me on somewhat different terms. He said, "We never pay off our old debts, until our new debts become old".
Escape velocity squared!
A great deal of our economic system is about debt. It is important to remember not all debt is created equal. A mirage is a naturally occurring optical phenomenon in which light rays are bent to produce a displaced image of distant objects. Joining the idea of a mirage and contagion with the reality of collapsing debt forms an interesting subject.
It is important to remember all debts and obligations do not come due at the same time. Also, it must be noted when a bill is not paid or defaults it often starts a long and drawn out legal battle, this collection process that may extend years without harsh consequences. This my friends is the reality of modern life in America and much of the world. It is also a reason not to be a lender. More on this subject in the article below.
http://brucewilds.blogspot.com/2014/05/debt-mirage-always-moving-into-di...
Unless your money is in PMs you are a lender.
DOLARES.
"Neither a borrower nor a lender be". Ben Franklin, I think.
Shakespeare
http://www.enotes.com/shakespeare-quotes/neither-borrower-nor-lender
duplicate.
A perfect timing for Argentina to resist against the money market tyranny
"Scared even me.."
The black hole of debt sucking all into it the escape velocity will never be enough as the money created is not being directed to real economy but the false illisuary deriative markets.
This is a designed position and is unsustainable.
Some like it big ....
Cash is King. Government is super big too. With the tax transmission under threat hard to see how then fico score of Detroit improves as well.