The $100 Trillion Global Debt Ponzi Scheme

Phoenix Capital Research's picture

If you are an investor, your big concern should not be about stocks… but what happens when the bond bubble goes bust.

For 30+ years, Western countries have been papering over the decline in living standards by issuing debt. In its simplest rendering, sovereign nations spent more than they could collect in taxes, so they issued debt (borrowed money) to fund their various welfare schemes.

This was usually sold as a “temporary” issue. But as politicians have shown us time and again, overspending is never a temporary issue. Today, a whopping 47% of American households receive some kind of Government benefit. This is not temporary… this is endemic.

All of this is spending is being financed by borrowed money… hence, the bond bubble, the biggest bubble in financial history: an incredible $100 trillion monster that is now growing by trillions of dollars every few months.

We do not write that point for effect. The US alone issued over $1 trillion in NEW debt in an eight week period towards the end of 2014.

The reasons it did this? Because it didn't have the money to pay off the debt that is coming due from the past… so it simply issued NEW debt to raise the money to pay back the OLD debt.

Sounds a lot like a Ponzi scheme… but the US is not alone in this regard. Globally, the sovereign debt bubble is over $100 trillion in size. Just about every major nation on the planet is sporting a Debt to GDP ratio of 100%+ and that is just including “on the balance sheet” debts… not unfunded liabilities like Medicare or Social Security.

This is why the Fed and every other Central Bank on earth is terrified of interest rates rising; because anything even resembling the normalization of interest rates would mean entire countries going bust.

Remember when interest rates move, they tend to move quickly. Consider Italy. It was considered one of the pillars of the EU since it adopted the Euro in 1999. Because of this, the markets were happy to allow Italy to borrow at stable rates with the yield on the ten year Italy government bond well below 5% for most of the last decade.

Then, in the span of a few weeks, everything came unhinged and the yields on Italy government bonds spiked, rising over 7%: the dreaded level at which a country is considered to be insolvent and set for default. It was only through extraordinary lending mechanisms from the European Central bank (the LTRO 1 and LTRO 2 programs to the tune of hundreds of billions of Euros… for an economy that is €2 trillion in size) that Italy was saved from potential systemic collapse.

Again, Italy went from being a former pillar of Europe to insolvent in a matter of weeks… all because interest rates spiked a mere 2% higher than usual.

Italy is not alone here. Western nations in general are in a similar state. This is why QE has been such a popular monetary tool for the Central Banks (since 2008 they’ve spent $11 trillion buying assets, usually sovereign bonds). QE was never meant to create jobs or generate economic growth… it was a desperate ploy by Central Banks to put a floor under the bond market so rates wouldn’t rise.

It’s also why Central Banks have kept interest rates at zero or even negative: again, they cannot afford to have rates rise. In the US, every 1% increase in interest rates means between $150-$175 billion more in interest payments on our debt per year.

Forget stocks, forget your concerns about this or that valuation metric, the REAL issue is what happens when the Bond Bubble pops. When that happens it won’t be individual banks going bust, it will be ENTIRE NATIONS.

If you’ve yet to take action to prepare for the second round of the financial crisis, we offer a FREE investment report Financial Crisis "Round Two" Survival Guide that outlines easy, simple to follow strategies you can use to not only protect your portfolio from a market downturn, but actually produce profits.

You can pick up a FREE copy at:


Best Regards

Phoenix Capital Research



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JenniferS's picture

Interest rates will never rise. The duopoly comprised of government and central banks have taken away this market and they are never going to give it back. The question remains; how long can this type of controlled economy last? It can last a long time as long as there is value created in the economy. The United states has shown that allowing bankers to control money is setting up a once great nation to fail simply because they allowed a group to control their money. It is human nature for people to want more than they have and they in such situations they can look at the UK direct lenders list.

the grateful unemployed's picture

i dont think anyone is frightened by the prospect of whole nations going bankrupt, after all Argentina has done it several times. and to paraphrase Jimmy Hendrix, fall mountain, just don't fall on me... and we are the cleanest dirty shirt ( i think) its like what Ellen Brown said recently, the system is headed for the rocks, and when it does only five or so banks will survive. chilling to think of all those that will fail, but what should you do (find one of the five and put your money there) of course in the past when a country like Argentina defaulted there were still plenty of strong countries, an IMF, and wealthy investors, to buy it back up. and the cathartic thing in ARG was that bond holders took the haircut, and stock owners took the pill, but eventually those stocks came back (as long as you had quality blue chips) and i completely agree, worry more about the bond bubble, and what your portfolio will look like after the haircut, and of course stocks will go down, but perhaps not out. if ARG is an example. and the people who sought safety in bonds to avoid the volatility of stocks arent doing themselves any favor. but they don't ring a bell at the top, and they don't tell you when the rules have changed.

griff63's picture

How much longer can the charade be kept alive? It's already lasted far longer than I would have thought. The white shoe boy mafia always seem to pull a new rabbit out of their top hats. It does seem that the QE trick has lost it's mojo, but what will they come up with next?

How does a simple lay person who lost a lot in the 2008 crash and was afraid to get back in the market and thus missed out on the huge market rise, protect what little he's managed to save up to this point? If they can keep the markets propped up for several more years, I should get back into equities, but they do seem quite over-inflated and look top heavy at this point. Like the other gentleman, the minute I jump back into equities, they market will crash.

Some of this stuff makes my head spin and I just don't think I'm smart enough to figure it out. I have a knack for doing the wrong thing at exactly the right time.

So, please, what do I do to protect my cash? Will cash continue to be king or should I buy some silver and gold as insurance? Silver is down more than gold, so that seems like the better insurance to buy at this time. I have some cash in a 'safe' bank, according to Weiss ratings, but wonder if I should move some to a safe deposit box or maybe just bury it in the ground so it's protected from fire and theft.


Bemused Observer's picture

It ALWAYS lasts longer than anyone thinks it can...but it only seems like forever when you are living through it. Afterwards, everyone will look back and think, "THAT escalated quickly..."

I'm like you, a small person just trying to hang on. I didn't lose in 2008, in fact actually bought some stocks at historic lows. But I sold them after tripling my money, because I suddenly 'saw' our economy, and what it really WAS, and decided to quit while I was ahead. I was never a big investor, so my windfall would probably have covered Blankfein's bar tab, but at least I kept it.

Those profits helped me through a bout with unemployment, so I'm right back where I started. I was sitting and stewing one night, and wondering why I never seemed to be able to save much. I've worked all my life, and do NOT have a high-maintenance why couldn't I save anything?

One day I sold some old silver coins, I needed the money. And it occurred to me that the quarters I was selling were worth almost 3 bucks apiece! The thing is, I USED to get paid in money like that! When I was a kid, I'd get a quarter for a lost tooth. If I saved that quarter, it would be worth 3 bucks today! Do the math on even a tiny rainy-day account...

But I DID save my "quarters" over the years. But, while I was sleeping, someone came along and changed that money...and in the process STOLE 2.75 out of every 3 dollars I'd managed to accumulate! And they did this WHILE raising my taxes and costs of living...

I suddenly realized WHY I couldn't get ahead, and it had nothing to do with hard work, or responsible was all about THEFT. Government sanctioned THEFT.

Fuck them all. That stupid silver quarter taught me a lesson. Respect the silver, and the gold. I should have stuck with Friend Silver, and when they took him out of the currency, I should have abandoned that currency, and chased him wherever his travels took him...bullion, coins, jewelry...even electronic scrap. I should have immediately exchanged my fiat for physical metals, and held them instead of my various accounts over all those years...

I'm making up for lost time now. And maybe this time the Fates are tossing me a revelation occurs at about the same time as the historic drubbing of PM prices.

I will NOT make the wrong choice THIS time.

LongSilverJohn's picture

Well, the way I figure it, if real disposable income can't keep pace with the cost of living, and if everyone else is a step ahead of us toward NIRP and competive devaulation, then a comparatively strong dollar deflates prices until our lower income can cover the deflated cost of living. It all makes perfect sense, baby. The "audacity of audacity" is all we need. Just gotta get those dissenters, like the Swiss, from losing their nerve....

LongSilverJohn's picture

Well, the way I figure it, if real disposable income can't keep pace with the cost of living, and if everyone else is a step ahead of us toward NIRP and competive devaulation, then a comparatively strong dollar deflates prices until our lower income can cover the deflated cost of living. It all makes perfect sense, baby. The "audacity of audacity" is all we need. Just gotta get those dissenters, like the Swiss, from losing their nerve....

SnatchnGrab's picture

Hold on, hold on, hold on, are  you telling me that going 18 Trillion in to debt at the Federal level (this number does not include state and local levels. Oh and we're talking the USA alone here) doesn't spur economic growth?

Huh. But paul krugman has a PhD and everything!

Rikeska's picture

As long as I stay out of equities the bubble will never burst.

The minute I re-enter, it's all over.  I'm lucky like that.

You have me to thank for this bull run.

JoWazzoo's picture

Some good points.  But when the Treasury floats 10 billion of a "new" series to pay 10 billion of an "existing" series - that is NOT NET NEW DEBT.  When the Fed pissed away 3.8 Trillion on QE THAT was new debt.  If Congress accepted Hussein's budget, the 500 Billion Deficit would be paid for with NEW debt that would add to the 18.3 trillion of existing debt.

buyingsterling's picture

True, but it proves insolvency. And it's pathetic.

badger10's picture

Can't figure out how you get growth in the economy by continuing to accumulate record debt!

TrustbutVerify's picture

Isn't there a net growth number that subtracts new debt from growth figures? 

cwsuisse's picture

Before the bond bubble pops the US might nuke Russia. This shall not prevent the bubble from popping but the noise of it popping will become indiscernible. 

Professorlocknload's picture

"We're the Gumnut. We don't need no stinkin' accountability!"

Salsipuedes's picture

What is it about "exceptionalism" that you don't understand?

LawsofPhysics's picture

I remember this article from 2001.  Still very applicable now, as it will be in 2030...

lester1's picture

All these central bank accounting tricks are needed to prop up the wealthy 1% and keep failed Reaganomics going.


Golbalization has been a massive failure for the USA


The FED is trying so hard to keep the economy from complete collapse..

LawsofPhysics's picture

Please, call it what it is asshat.  Fraud was around long before Reagan.

we built this city's picture


this guy lives on the moon

10 years shouting for short!

are markets rigged? yes

is there any conn between markets and economy? no

are we going to c a meltdown? sure sometimes in the future