Global Debt Bubble Hits New All Time High – One Quadrillion Reasons To Buy Gold

- Global debt bubble hits new all time high - over $237 trillion
- Global debt increased 10% or $21 tn in 2017 to nearly a quarter quadrillion USD
- Increase in debt equivalent to United States' ballooning national debt
- Global debt up $50 trillion in decade & over 327% of global GDP
- $750 trillion of bank derivatives means global debt over $1 quadrillion
- Gold will be ‘store of value’ in coming economic contraction
- Global debt is the mother of all bubbles

 

Source: Bloomberg

Global debt has now reached over 327% of global GDP, $237 trillion. Prior to the financial crisis it was less that $150 trillion. The amount by which it has surged in just one year is the same amount as the ballooning national debt of the United States.

The response of our leaders, central bankers and financial thinkers to this latest data?

It was good news as it showed that thanks to global growth the ratio of debt-to-gross domestic product fell for the fifth consecutive quarter. No irony in the fact that the economic growth is entirely funded by debt itself - adding another shaky layer to the house of cards.

Christine Lagarde said earlier this week:

The bottom line is that high debt burdens have left governments, companies, and households more vulnerable to a sudden tightening of financial conditions. This potential shift could prompt market corrections, debt sustainability concerns, and capital flow reversals in emerging markets.

A sudden tightening of financial conditions is inevitable. The latest FOMC minutes released yesterday showed that members plan to increase interest rates at a faster rate than previously expected. This was inevitable given the loose monetary policy that central banks have been enjoying for the last decade.

As Jim Rickards summarises:

We hear that the U.S. is facing a debt crisis because budget deficits are out of control. We hear that China is facing a debt crisis because of wasted infrastructure investment, bank Ponzi schemes and bad loans to money-losing state-sponsored enterprises.

Next we hear that emerging markets are facing a separate debt crisis because of dollar-denominated debt that cannot be repaid if higher U.S. interest rates lead to a stronger dollar.

In short, the whole world seems to be facing a debt crisis in various forms.

Global debt is primarily made up of three groups: non financial corporates, governments and households. Each as indebted as the next, each as addicted as the next with no detox programme on offer.

 

Rickards reminds us that $237tn is only part of the story:

This debt is in addition to approximately $750 trillion of bank derivatives as reported by the Bank for International Settlements (BIS).

Adding the debt and derivatives together produces over $1 quadrillion of financial obligations of various kinds. This is far more that the amount of debt and derivatives outstanding before the last financial crisis in 2008.

So bad is the debt crisis that five leading economists recently felt compelled to write an op-ed in the Washington Post warning Americans of the impending debt crisis.

From this point forward, even if economic growth continues uninterrupted, current tax and spending patterns imply that annual deficits will steadily increase, approaching the $1 trillion mark in two years and steadily rising thereafter as far as the eye can see.

Unless Congress acts to reduce federal budget deficits, the outstanding public debt will reach $20 trillion a scant five years from now, up from its current level of $15 trillion. That amounts to almost a quarter of million dollars for a family of four, more than twice the median household wealth.

This string of perpetually rising trillion-dollar-plus deficits is unprecedented in U.S. history.

In recent months, we have seen an inevitable rise in interest rates from their low levels of recent years. Rising interest rates and increasing deficits threaten to build upon each other to send public debt spiraling upward even faster. When treasury debt holders start to doubt our government’s ability to repay, or to attract future lenders, they will demand higher interest rates to compensate for the risk. If current spending and tax policy continue unaltered, higher interest costs will have to be financed by even more debt. More borrowing puts more upward pressure on interest rates, and the spiral continues.

Household debt is not just a major problem in the US. In the latest release of figures Belgium, Canada, France, Luxembourg, Norway, Sweden and Switzerland each saw household debt as a percentage of GDP hit all-time highs. Only Italy and Ireland remain as the two mature market countries where household debt as a percentage of GDP is below 50%.

Things are even worse in emerging market South Korea where household debt to GDP is approaching parity, currently at 94.6%.

 

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Imagine how much worse things will get as interest rates across the board begin to rise. Or, more likely, as central banks change their minds about interest rate rises and allow the period of easy money to carry on. Cue major inflation around the globe and ever-higher levels of debt.

Conclusion 

The IIF, the group responsible for the data release, point to central banks as the culprits for these devastating figures.

“Still-low global rates continue to support unprecedented levels of debt accumulation.”

This is no surprise as they (as the puppets of governments and bankers) are the reason so many savers, households and investors have had to work hard to protect their assets in the last decade. Such little regard has been shown for the long term health of the economy or value of our hard won savings.

The global debt figures serve once again as a reminder that individuals and businesses must take responsibility for their own wealth and protect it from the ongoing currency debasement and gigantic monetary experiment of central banks.

Gold that is held in a segregated, allocated portfolio is a key way to protect your savings from counter-party risk in the financial system.  Gold’s performance in 2017 into this year, along with low gold liquidations, increased demand for gold coins and bars and central bank purchases shows the prudent money is again diversifying into gold in anticipation of the next financial crisis.

 

Listen on SoundCloud , Blubrry & iTunesWatch on YouTube below


Related reading

Global Debt Crisis II Cometh

Global Debt Bubble Understated By $13 Trillion Warn BIS

Gold A Store Of Value – Protect From $217 Trillion Global Debt Bubble

 

News and Commentary

Gold, Crude Speculators Betting “Mission Not Accomplished” (Nasdaq.com )

Gold edges up after Syria strikes (Reuters.com)

Asian Stocks Trade Mixed as Treasury Yields Gain (Bloomberg.com)

Syria brushes off U.S.-led airstrikes, launches new attacks against rebels (MarketWatch.com)

Oil, gold to gain on Syrian strikes, Russian retaliation in focus (Reuters.com)


Source: Morgan Stanley via ZeroHedge

Bond King Jeff Gundlach Says Gold Could Rally $1000 (CNBC.com)

Gundlach: Gold On The Verge Of "Thousand Dollar" Breakout (ZeroHedge.com)

Morgan Stanley Uses Gold As Proxy For The "True Value Of A Dollar" (ZeroHedge.com)

Citi: "There Is A Massive Problem" With The Bond Market (ZeroHedge.com)

Solid earnings season won’t be enough to avert another correction - Economist Shiller (CNBC.com)

Gold Prices (LBMA AM)

13 Apr: USD 1,340.75, GBP 938.93 & EUR 1,087.35 per ounce
12 Apr: USD 1,345.90, GBP 951.01 & EUR 1,090.99 per ounce
11 Apr: USD 1,345.20, GBP 947.96 & EUR 1,087.86 per ounce
10 Apr: USD 1,335.95, GBP 942.25 & EUR 1,083.46 per ounce
09 Apr: USD 1,328.50, GBP 941.91 & EUR 1,082.33 per ounce
06 Apr: USD 1,325.60, GBP 946.08 & EUR 1,082.75 per ounce
05 Apr: USD 1,327.05, GBP 943.67 & EUR 1,080.75 per ounce

Silver Prices (LBMA)

13 Apr: USD 16.51, GBP 11.57 & EUR 13.40 per ounce
12 Apr: USD 16.66, GBP 11.74 & EUR 13.50 per ounce
11 Apr: USD 16.57, GBP 11.67 & EUR 13.39 per ounce
10 Apr: USD 16.49, GBP 11.65 & EUR 13.38 per ounce
09 Apr: USD 16.34, GBP 11.59 & EUR 13.32 per ounce
06 Apr: USD 16.28, GBP 11.61 & EUR 13.30 per ounce
05 Apr: USD 16.31, GBP 11.59 & EUR 13.28 per ounce


Recent Market Updates

- Oil Surges Over 8%, Gold and Silver Marginally Higher, Stocks Gain In Volatile Week
- EU and Euro Exposed To Risks Including Trade Wars and War With Russia In Middle East
- Trump Tweets Russia “Get Ready” For Missiles In Syria – Gold, Oil Rise and Stocks Fall
- Private: EU and Euro Exposed To Trade Wars, Energy Dependence, Anti-EU and Anti-Euro Movements
- Trump Making ‘Major Decisions’ on Syria, Iran and Russia Response ‘Very Quickly’
- Gold Out Performs Stocks In 2018 and This Century By Ratio Of Two To One
- Jamie Dimon Warns Of Potential ‘Market Panic’
- Silver Bullion: Should We Be Worried About Silver?
- Martin Luther King Jr. Anniversary: Reminds Us Of Costs Of War To Society and Financial System
- Gold Outperforms Stocks In Q1, 2018
- Brexit, Stagflation Pressures UK High Street
- Gold Is Money While Currencies Today Are “IOU Nothings”
- “Stars Are Slowly Aligning For Gold” – Frisby

Comments

mianne Kokulakai Mon, 04/16/2018 - 13:16 Permalink

 

"Gold is worth what our masters say it is worth" . You are right . But is it real gold or the kind of gold that American traders tried to sell to China in 2009, that is tungsten covered with a thin layer of real gold, weighing exactly like real gold ? As gold extraction is much slower and more difficult than its trade, we may suppose that most of the "gold" sold everywhere in the world these days is tungsten  .

In reply to by Kokulakai

meterman Mon, 04/16/2018 - 08:47 Permalink

AHHH Yes - Another "BUBBLE" that will soon burst and destroy the world. So say the Gold HUCKSTERS for the last ten + years.

Anyone seen a bubble burst lately? Three years ago? eight years ago?

The Gold HUCKSTERS never give up.

Paul Morphy Mon, 04/16/2018 - 09:42 Permalink

This situation is like the Titanic, holed below the waterline, the water keeps pouring in quicker than the water can be extracted out. Eventually, the volume of the water pouring will bring the entire ship down.

 

Ireland's GDP is artificially massaged. Our national debt has been more or less the same since 2010.

Calculus99 Mon, 04/16/2018 - 09:56 Permalink

Someone who suggest Gold as part of an overall investment portfolio is about as far from a 'huckster' as could be. Hence, if you don't own any it's always a good time to buy, even if it then drops by 50%. 

It's basically common sense. Anyone who has investments of over $100k that doesn't own at least $5k or Gold is simply speaking a complete moron. 

44magnum Mon, 04/16/2018 - 10:00 Permalink

Just who does the world owe that money to?

What will they do when the world refuses to pay?

What will they do when the world decides they should live poor like the rest of the world?

lunaticfringe 44magnum Mon, 04/16/2018 - 13:00 Permalink

Well they sell treasury debt and we pay interest. Interest to other countries, governments, and private and public pension funds. One day we will no longer be able to pay the interest and they ll start printing like mad. That's when the whole shitaree collapses. A lot of people will be left with nothing.

Trust me when I say this- the price of gold may go supernova but the problem is you'll be trading it for some form of fiat asswipe. I ll gladly trade you some newspaper for gold..

Owning gold thru that period will help but its certainly not the whole solution. Just a part. 

In reply to by 44magnum

everything1 Mon, 04/16/2018 - 10:12 Permalink

It's kind of an everybody's doing it kind of thing, outside of the obvious bailout or tbtf scenario's, lots of this will never be paid back, still more rolled over, etc. Interest rates are still cheap, better yet if your locked in, when/if inflation comes your debt dollars are worth less, many bank on that as well.

Servicing the debt is more important than the debt.