It is now self-evident to any sentient being (excludes CNBC shills, Wall Street shyster economists, and Keynesian loving politicians) the mountainous level of unpayable global debt is about to crash down like an avalanche upon hundreds of millions of willfully ignorant citizens who trusted their politician leaders and the central bankers who created the debt out of thin air. McKinsey produced a report last year showing the world had added $57 trillion of debt between 2008 and the 2nd quarter of 2014, with global debt to GDP reaching 286%.
The global economy has only deteriorated since mid-2014, with politicians and central bankers accelerating the issuance of debt. These deranged psychopaths have added in excess of $70 trillion of debt in the last eight years, a 50% increase. With $142 trillion of global debt enough to collapse the global economy in 2008, only a lunatic would implement a “solution” that increased global debt to $212 trillion over the next seven years thinking that would solve a problem created by too much debt.
The truth is, these central bankers and captured politicians knew this massive issuance of more unpayable debt wouldn’t solve anything. Their goal was to keep the global economy afloat so their banker owners and corporate masters would not have to accept the consequences of their criminal actions and could keep their pillaging of global wealth going unabated.
The issuance of debt and easy money policies of the Fed and their foreign central banker co-conspirators functioned to drive equity prices to all-time highs in 2015, but the debt issuance and money printing needs to increase exponentially in order keep stock markets rising. Once the QE spigot was shut off markets have flattened and are now falling hard. You can sense the desperation among the financial elite. The desperation is borne out by the frantic reckless measures taken by central bankers and politicians since 2008.
- 637 rate cuts since Bear Stearns
- $12.3 trillion of asset purchases by global central banks in the past 8 years
- $8.3 trillion of global government debt currently yielding 0% or less
- 489 million people currently living in countries with official negative rates policies (i.e. Japan, Eurozone, Switzerland, Sweden, Denmark)
- -0.92%, the most negative yield in the world (2-year Swiss government bond)
Massive levels of debt and negative interest rates have done nothing to revive U.S., European or Asian economies. The natives are growing restless, as the early electoral success of political outsiders like Trump and Sanders substantiates. Far right parties in Europe are gaining traction as hordes of Muslim refugees overwhelm their countries. Central bankers, who formerly graced the covers of Time Magazine as saviors and heroes, are now being revealed as nothing more than glorified money printers with PhDs and no plan B.
The trillions in low-grade junk bonds are beginning to go bad. The bond market is the canary in the coal mine. A tsunami of defaults is approaching the shoreline, investors are running for the hills and deranged central bankers are telling people to come a see the colorful shells in the surf. As John Hussman points out, following their advice will be fatal.
Despite short-term interest rates being only a whisper above zero, we increasingly hear assertions that “financial conditions have tightened.” Now, understand that the reason they’ve “tightened” is that low-grade borrowers were able to issue a mountain of sketchy debt to yield-seeking speculators in recent years, encouraged by the Federal Reserve’s deranged program of quantitative easing, and that debt is beginning to be recognized as such. As default risk emerges and investors become more risk-averse, low-grade credit has weakened markedly. The correct conclusion to draw is that the consequences of misguided policies are predictably coming home to roost. But in the labyrinth of theoretically appealing but factually baseless notions that fill the minds of contemporary central bankers, the immediate temptation is to consider a return to the same misguided policies that got us here in the first place, just more aggressively.
Based on the CDS market, fear is rising rapidly and European bank stocks are collapsing faster than they did in 2008. The Too Big To Trust Wall Street banks have seen their stocks fall 25% thus far. Bank debt has fallen even faster. The lying and denials by bank CEOs sounds exactly like the summer of 2008. The most smoke is coming from Deutsche Bank, and where there’s smoke there’s fire. The papering over of billions in bad debt with more bad debt is reaching its logical and expected disastrous conclusion. John Hussman notes when credit default swaps soar, the massive level of defaults are only a quarter or two away, despite the propaganda and lies perpetuated by Wall Street to cover their asses as they scramble to escape again.
