We discuss the real problem facing global growth right now, the massive government debt and credit bubble in this video. Republicans and Democrats keep spending and borrowing like there is no tomorrow.

The global financial numbers don`t make sense, governments and central banks cannot add to their balance sheets in an infinite manner, and expect global growth to buck the current downtrend. Moreover, who is left to buy now, where is the incremental buyer in the financial system?

We have a Global Financial Ponzi Scheme, the numbers just don’t add up, financial gimmicks with no basic structural finance soundness underneath, are a house made of cards and doomed to crash, this is where we are at currently in global finance.

The ‘Global Financial System’ is the real big short, it is the biggest short we have ever seen in the history of financial markets!

You cannot lower interest rates any lower, you cannot borrow any more, you cannot add any more to central bank`s balance sheets, governments cannot borrow anymore money through unsound deficit financing.

We have met the endgame, the can has been kicked as far down the road, the inevitable rubber meets the road reality day is here, now pay up. You cannot lower interest rates any lower, you cannot borrow any more, you cannot add any more to central bank`s balance sheets, governments cannot borrow anymore money through unsound deficit financing. Now rates are going up, inflation is going up, as there has been too much money printing, currency devaluation, and central bank inspired fiat capital created chasing too few real goods in the global economy. And moreover, you cannot “Trade War” your way to prosperity through these populous movements which are a reflection of the reality on the ground of the ‘Global Zero Sum Game’ of a few winners and a lot of net losers.

Debt borrowed in credit markets is at 50 year high

Debt borrowed in credit markets is at 50 year high | Picture Courtesy – Heritage Foundation

The reality is that at this point structural changes need to be made that respects finance principles and basic capitalistic models.

Since politicians and central bankers are too weak and incompetent to do anything but kick the can down the road creating further debt, credit and asset bubble “Days or Reckoning” the only true ‘Reality Check’ and form of discipline comes via a global recession and financial market crash. This is the forced reset option that occurred in the second half of 2007!

Who is going to regulate Central Banks and Governments because they have done far more harm to the stability of capitalism and financial markets than any investment bank, hedge fund, or financial institution in the history of financial markets. Until we have systemic changes in many areas, and no I don’t think Donald Trump is the savior, just like President Obama wasn’t, we are going to struggle mightily as a society both locally and globally. At this point, there is still no light at the end of the tunnel, “There is No Hope for Humanity!”

This basic point, and it is a finance and capitalistic point is that if you cannot afford to provide a good job and future for your children, then you don`t have kids, period. Until this basic economic fact is adhered to, the entire financial system is in trouble, because the numbers just don’t add up anymore. Advances in technology are only going to make this finance law of nature worse, and providing a basic income for a bunch of “idle population” because there are no jobs for them, is just more unsound ‘Finance Can Kicking’.

The basic laws of finance and capitalism have to be respected, the finance numbers have to add up or make sense.

If the world continues to create more people than there are good jobs, the finance equation continues to break down, and humanity continues down its current path of systemic breakdown.

We are basically still pretty stupid animals, and unless we “Smarten Up” considerably there is no hope for humanity, and we are in for a lot of ‘Finger Getting Burned on the Stove Learning Events’ and ‘Finance Principle Disciplining’ as a recurring theme for humanity. The question is will humans ever “Smarten Up” and learn from these past mistakes?

 

And by no hope, I mean from the global zero sum game of winners and losers, a few global winners and most of the world as net losers depending how exceptionally well they are able to navigate the multitude of financial, economic and politic landmines of incompetent structural policies by governments, central banks and religious leaders around the world.


This article was originally published in EconMatters.
Featured Image Source – Waking Times
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Posted by The Indian Economist