A Global Debt Time Bomb

I just read an article, written by Robert J. Samuelson, who wrote for Newsweek for 25 years and now writes editorials for The Washington Post. He has a BA from Harvard in political science. The article is called the $247 trillion global debt bomb and covers many valid points, such as the fact that global debt has soared since 2003, global easing efforts have failed miserably, and the last thing anyone could stand at this point is a global trade war. A growing global debt requires a corresponding global increase in income and that’s simply not happening. Brexit, a floundering European Union, and a Fed fed, steroid-driven, U.S. stock market are combining to prove that easing attempts are about to put the global economy into a paralyzing catatonic stupor. A trade war at this point would be nothing more than a cherry on top of this economic volcano.

The U.S. had near zero interest rates for many years, a vibrant labor force, and a stronger than usual consumer buying force, but somehow CEO’s of public companies couldn’t find a way to capitalize. They couldn’t find the funds to provide necessary infrastructure and maintenance, couldn’t grow the company and prepare for new opportunities, and couldn’t increase wages, maximizing employee commitment and loyalty. Nevertheless, talented number-crunchers that they are, the same CEO’s did manage to borrow $1.8 trillion in cheap Fed money and spend $2.1 trillion on company stock buyback programs, giving a bump to the company’s stock price, thereby giving investors a(n un-monetized) thrill, improving the ‘looks’ of the bottom line, and qualifying executives for bonuses, in a company now fully prepared for a one-way trip to the dung heap.

Samuelson reports that he gathered a great deal of  information from Hung Tran, the Institute of International Finance’s Executive Director, who must have got his degree in poly sci also, because his math skills are sorely lacking, particularly when he stated that “banks are better capitalized now than before the 2008 crisis.” Yes, perhaps banks have added $800 billion in common equity capital since 2009, but how that offsets an exponentially increased derivative liability exposure, reaching well into the trillions, I cannot see. He reports that the Fed’s “stress test” was passed by all 35 bank holding companies tested. But this is purely a matter of the fox “testing” the hen house. If the CBO conducted the test, I can assure you that the results would be in diametric opposition.

Interest rates are and will continue to rise, as will the national debt, even without the trillion earmarked to be added next year alone. Ether on the trading floor is the only thing ‘lifting’ the stock market and when it wears off, the fall will be precipitous. Instead of ‘leading,’ we’re flustering allies and threatening trade wars with the only people we could possibly join forces with to stem this negative global trend. At this point, an economic storm is coming. How long and catastrophic remains to be seen, but the greatest financial protection for such an event, can be provided by physical gold, silver, and other precious metals. Don’t get caught without a chair when the music stops! Call American Bullion at (800) 653-4653 for professional assistance.

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One comment

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