Practically every other developed country in the world is in debt. In terms of national debts alone, the US has $22 trillion, China $9.5 trillion, Japan $12 trillion, Germany $2.2 trillion, UK 3.5 trillion, India $2.8 trillion, France $3 trillion, Italy $3 trillion, Brazil $2 trillion, Canada $1.8 trillion — the list goes on and on. And let me remind you, those are only GOVERNMENT debts. Not the unfunded liabilities of those respective countries.
People, we have a major global debt crisis right in front of our faces, and it's getting worse, and worse, by the day. If something isn't done to change the acquisition of debt worldwide, we will eventually see a financial meltdown like the world has never known.
In my view, here is how it will start. Since banks set interest rates worldwide, they have been able to enjoy the economic benefits of growing a debt-based economy, with the LUXURY of new debt being subjected to low interest rates. Meaning, people and businesses acquire debt, at low rates that the Fed has created. However, I believe that Reserve Banks will eventually lose control of interest rates, and that is where the collapse will begin.
You may be wondering how Reserve Banks could lose control of rates. The answer is demand. Since interest rates and bond prices have an inverse relationship, I believe that bond prices will eventually crater, due to a sudden collapse in demand for debt. In other words, owning debt is becoming increasingly risky, as debt continues to climb, while NOBODY PAYS THE DEBTS!! Who is going to want to own debt, when practically NOBODY is paying it? Eventually, I think demand for debt will collapse, and therefore bond prices will collapse. When bond prices collapse, interest rates will skyrocket, regardless of what banks want to "set" them to.
In this scenario, tens of trillions in global debt will suddenly be exposed to inflated interest rates, which will cause these debt figures to swell exponentially. The debt could rapidly grow into the hundreds of trillions, or even quadrillions of dollars. This is how I believe we could see a global currency crisis, and potentially war, as a result.
Now, there are things that Central Banks can do to prolong the inevitable. They could print more money (which they will.) They could suppress interest rates (which they are.) They could even take rates negative, like Japan did. That means that central banks could start charging depositors a fee for their deposits. The intention is to incentivise depositors to keep their money out of the banks, and circulate through the economy. It's an inadvertent form of economic stimulus, and extremely for cryptocurrencies. Either way, the outlook is very grim, in terms of global debt.
So, when can we expect this crisis to erupt? Well, I think it will be born out of the next recession. And I believe that the next recession is most likely less than 18 months away. We've seen an inversion of the yield curve. We've seen the Fed reverse course on rates, showing us all that they are too scared to hike 0.25%, for fear of collapsing the market, causing a recession, and a debt crisis as a result.
I fully expect to see the US cut rates again, AND return to . They will pump the economy with worthless money hot off of their presses, and they will probably be successful at temporarily preventing a complete collapse. But folks, this system is BOUND TO FALL, and eventually, it will.
So, the chart in front of you is something that I've shared in the past. It's my personal recession indicator. I know that
other people follow the initial claims movement as a recession signal, but I have tweaked it to perfection. The blue line is the Initial Jobless Claims. The Pink Line is the S&P 500 . As you can see, when the 25 MA (in orange) crosses above the 100 MA (in green) it has corresponded to an absolute peak in the market, and a subsequent recession. In October of 2000, the signal triggered right at the top of the dot com bubble. Then, in October of 2007, the signal triggered again right at the market high before the Great Recession. Now, the stock market is nearly three times higher than it was then, all thanks to the trillions of dollars of worthless money created by the Fed, during QE1, QE2, and QE3. All I'm waiting for, is the next signal. When that orange 25 period moving averages spikes above the green 100 period moving average, the recession will be just getting started.
As a side note, US unemployment is at record lows, and it tends to bottom out before a recession. I believe that the US labor market is reaching a point of saturation, and that will likely cause growth to stagnate, which will contribute to the emergence of a recession.
I'm The Master of The Charts, The Professor, The Legend, The King, and I go by the name of Magic! revoir.
***This information is not a recommendation to buy or sell. It is to be used for educational purposes only.***