Is the era of debt ending?

 DEBTORS BEWARE, THE WORLD IS CHANGING

THE CENTRAL BANKS CAN NO LONGER STOP DEBT LIQUIDATION

As a youth I spent much time with people who had lived through the great depression. They had a fear of debt and also a distrust of banks. I suspect they went to their graves without ever overcoming those beliefs.

Most all economic recessions and depressions are caused by excessive debt. Debt was once something to be avoided, but in this modern era it has been embraced as something everyone does. Everyone from the Federal government, State government, school districts, corporations and individuals all happily live in a debt based existence. Much of this has been made possible by the policies of the federal reserve which has not allowed a true debt liquidation, since the 1980's. Every crisis has been met with the issuance of easy money and more debt. It now appears that his practice is going to come to an end.

The last real balanced budget by the U.S. was in 1969, no coincidence that in 1971 the U.S. stopped exchanging U.S. dollars for gold. no coincidence that the last silver based coins were issued in 1970, 90% silver coins ended in 1964 and 40% silver halves in 1970. The linkage to metals was a restraint on government deficit spending.

It was at the same time that the U.S. government convinced Saudi Arabia to price  world oil sales in dollars. It gave the U.S. government the ability to engage in massive deficit spending by exporting fiat created dollars to the rest of the world. Shortly after the world entered the era of globalization and the U.S. proceeded to run huge trade deficits with producing countries around the world. Another opportunity to spread U.S. created inflated dollars around the world. In reality, the U.S.'s biggest export was inflated dollars and debt.

At the same time debt became the method of asset purchases, from cars with 3 year loans to cars with 7 year loans. From mortgages mostly going to 30 year loans and in Japan at one time 100 year loans. The age of debt was soundly in place.

Today in 2023 it appears that much of that is going to be reversed. The dollar is systematically being rejected in oil transactions, making the dollar less needed in world trade. The biggest holders of U.S. debt are in the process of liquidating their holdings and buying gold or other assets. The latest treasury auction found no buyers except the government and some large banks. The debt is exploding, deficits are exploding and a possible flight from the dollar is growing. Think of it as all those dollars floating around the world will be coming home, raising inflation and removing most options of the federal reserve to stop the debt liquidations.

Higher interest rates to service the debt leads to higher rates for all lending, this will gut the real estate market and many banks who hold treasuries with 1 % yields will have huge losses as the value of these bonds crater. The go to of lower rates and easy credit will only hasten the flight from the dollar and may become an impossibility. Debt liquidation, which has always been inevitable, is now beginning. It will be painful for everyone, worldwide. It will be especially painful for those nations and individuals who have large debts. 

Higher interest rates and tight money will create the liquidation of many businesses with large debts, this will lead to unemployment and the vicious cycle of debt liquidation, foreclosures, repossessions and a general state of economic decline. It is inevitable. The question is how will it be managed by the current crowd of economic illiterates running the government today. It can quickly go from a painful experience to a disaster if they believe they can avoid the consequences of their irresponsibility by war or other draconian methods.