Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24
RECESSION When Yield Curve Uninverts - 8th Sep 24
Sentiment Speaks: Silver Is Set Up To Shine - 8th Sep 24
Precious Metals Shine in August: Gold and Silver Surge Ahead - 8th Sep 24
Gold’s Demand Comeback - 8th Sep 24
Gold’s Quick Reversal and Copper’s Major Indications - 8th Sep 24
GLOBAL WARMING Housing Market Consequences Right Now - 6th Sep 24
Crude Oil’s Sign for Gold Investors - 6th Sep 24
Stocks Face Uncertainty Following Sell-Off- 6th Sep 24
GOLD WILL CONTINUE TO OUTPERFORM MINING SHARES - 6th Sep 24
AI Stocks Portfolio and Bitcoin September 2024 - 3rd Sep 24
2024 = 1984 - AI Equals Loss of Agency - 30th Aug 24
UBI - Universal Billionaire Income - 30th Aug 24
US COUNTING DOWN TO CRISIS, CATASTROPHE AND COLLAPSE - 30th Aug 24
GBP/USD Uptrend: What’s Next for the Pair? - 30th Aug 24
The Post-2020 History of the 10-2 US Treasury Yield Curve - 30th Aug 24
Stocks Likely to Extend Consolidation: Topping Pattern Forming? - 30th Aug 24
Why Stock-Market Success Is Usually Only Temporary - 30th Aug 24
The Consequences of AI - 24th Aug 24
Can Greedy Politicians Really Stop Price Inflation With a "Price Gouging" Ban? - 24th Aug 24
Why Alien Intelligence Cannot Predict the Future - 23rd Aug 24
Stock Market Surefire Way to Go Broke - 23rd Aug 24
RIP Google Search - 23rd Aug 24
What happened to the Fed’s Gold? - 23rd Aug 24
US Dollar Reserves Have Dropped By 14 Percent Since 2002 - 23rd Aug 24
Will Electric Vehicles Be the Killer App for Silver? - 23rd Aug 24
EUR/USD Update: Strong Uptrend and Key Levels to Watch - 23rd Aug 24
Gold Mid-Tier Mining Stocks Fundamentals - 23rd Aug 24
My GCSE Exam Results Day Shock! 2024 - 23rd Aug 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Global "Debt Mountain": Beware of This "New Peak"

Interest-Rates / Global Debt Crisis 2020 Nov 13, 2020 - 01:17 PM GMT

By: EWI

Interest-Rates

Prepare now for a situation that is "building to an epic finale"

Most people going about their daily business probably never give a moment's thought to global debt.

But, in EWI's view, the topic deserves serious attention.

You only have to think back to the 2007-2009 subprime mortgage meltdown to know why. Of course, subprime mortgages are a form of debt, and when many of these loans turned sour, the entire global financial system teetered on the brink of collapse.

But, why were so many of these bad loans made in the first place? It boils down to one word: confidence ... confidence that the loans would be repaid, confidence that the stock market would continue to rally, confidence in the economy and confidence in the future, in general.


In the years following the 2007-2009 global financial crisis, that confidence has returned in spades.

A global "debt mountain" has hit a new peak.

Here's a chart and commentary from our just-published November Global Market Perspective:

Whether or not countries can service their debt will be the defining economic question of the coming decade. ... For now, mood remains positive, so the world remains awash in IOUs and governments still retain the ability to add more. ... Across the world, advanced economies have seen their collective debt-to-GDP ratios push past levels last seen at the end of World War II. The situation is building to an epic finale. ...

The 2020 edition of Robert Prechter's Conquer the Crash discusses unsustainable debt levels:

The ability of the financial system to sustain increasing levels of credit rests upon a vibrant economy. At some point, a rising debt level requires so much energy to sustain -- in terms of meeting interest payments, monitoring credit ratings, chasing delinquent borrowers and writing off bad loans -- that it slows overall economic performance. A high-debt situation becomes unsustainable when the rate of economic growth falls beneath the prevailing rate of interest on money owed and creditors refuse to underwrite the interest payments with more credit.

Getting back to the 2007-2009 financial crisis, that alarming episode may have only been a preview of what's next.

It does appear that an "epic" deflation is likely.

Learn what you need to know by reading the special free report, "What You Need to Know Now About Protecting Yourself from Deflation."

Here's a quote:

Near the end of a major expansion, few creditors expect lots of default, which is why they lend freely to weak borrowers. Few borrowers expect their fortunes to change for the negative, which is why they borrow freely.

Deflation involves a substantial amount of bad debts because almost no one expects deflation before it starts. Surprise is a prerequisite of deflation.

However, you and your family can be prepared.

You can have Elliott Wave International's special free report on your computer screen in moments by following this link: "What You Need to Know Now About Protecting Yourself from Deflation."

This article was syndicated by Elliott Wave International and was originally published under the headline A Global "Debt Mountain": Beware of This "New Peak". EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in