Quote:
Originally Posted by Bobbyoutback
Alex ' the problem is DEBT
I lifted Egon van Greyerz potential scenaro's from his recent article :
BIGGEST ECONOMIC DISASTER IN HISTORY
The world is heading for an economic disaster of a magnitude that is much greater than the 1930s depression. There is really nothing to compare with in history since the world has never been in a similar situation before when every single major economy is at risk.
GLOBAL DEBT WILL KILL THE WORLD ECONOMY
Never before in history have all major countries lived above their means for such an extended period. And never before has global debt been almost 4X global GDP.
$2 QUADRILLION DEBT AND LIABILITIES
In addition, unfunded liabilities, like medical care and pensions, are at least $300 trillion globally. If we add gross derivatives of $1.5 quadrillion, which are likely to turn into real debt as counterparties fail, the total debt and liabilities are above $2 quadrillion.
DEBT AT 30X GLOBAL GDP CAN NEVER BE REPAID
$2 quadrillion is almost 30X global GDP. Who is going to repay this debt? Certainly not the current generation which has incurred most of it. And certainly not future generations which will neither have the means, nor the inclination to pay for the sins of the previous generation.
DEBT IS GROWING AT AN EVER FASTER RATE
Most major economies are continuing to spend money they haven’t got and thus to print money and expand credit at an ever faster rate. The US for example has increased debt by $800 billion since June. As the US economy falters, annual deficits of $1-2 trillion will increase manifold in the coming years. And when the banking system comes under pressure, which is happening right now, money printing will accelerate at an ever faster pace. As the global economy falters, most major countries will see deficits and debts rising quickly.
NEGATIVE RATES – A RECIPE FOR DISASTER
Negative rates are a disaster for the world. Over $17 trillion debt now carries negative interest. Firstly, it kills the incentive to save. A fundamental economic principle is that savings equal investments. The world cannot grow soundly with investments financed solely by debt or printed money. With no savings, most banks do not have funds to lend to businesses. Thus investments will slow down dramatically. Negative rates also lead to investors chasing ever riskier investments to get a higher return. Also, pension funds will not achieve adequate returns to cover outstanding liabilities.
DEBT AND ALL BUBBLE ASSETS LIKE STOCKS AND PROPERTY WILL IMPLODE
Like the climate virtually all asset classes are overheated. The bubbles that the credit expansion has created will implode in the next few years together with the debt that created the bubbles. Central banks around the world will make a desperate attempt to save the world economy by printing unlimited amounts of money.
ALL CURRENCIES WILL GO TO ZERO – DEFLATION WILL FOLLOW HYPERINFLATION
As money printing accelerates, paper money will become worthless and a depressionary hyperinflation will hit the world. Hyperinflationary periods on average last for around 1-3 years and are followed by a deflationary implosion of all asset values in real terms. At that point substantial parts of the financial system will cease to function properly or go bankrupt.
GOVERNMENTS WILL LOSE CONTROL
Before new financial and political systems emerge, there will be social upheaval and unrest. Criminality will be widespread as desperate and hungry people will do what they can to feed themselves and their children. In many countries, immigrants will be blamed for the misery of the people. Right and left wing radicals will fight immigrants. There are likely to be periods of anarchy as governments lose control. I do not believe that an elite will control the world at that point. The disorderly unwinding of asset bubbles and the world economy will be uncontrollable.
Bobby  |
I am not worried as I am going to plant some beet root.
Look the world may be in bad shape but it will never reach us here.
Look at it this way...why does the bubble need to burst...the universe expands and nothing stops it so why can't the world economy do the same.
No one wants it to end and it wont...we are entering a new era where so long as food and energy production continue everything will be fine...
Heck even war is now just a reason to keep industry going...we could get by without killing folk.
It will all be ok..but plant some beetroot just in case.
I guess you will be ok...if it comes down to us all living on beetroot you can say "I told you so".
Alex
And thanks Bobby for taking the time to gather the information for your post.
And look if things do start to go downhill I will come out of retirement and lead the world thru the crisis...so you see there is nothing to worry about.
Alex