Debt crisis may become overwhelming.

 2008 WAS THE UNHEEDED WARNING

BEWARE OF DANGEROUS SOLUTIONS

While everyone is focused on tariffs and war, the biggest threat to world stability is the debt crisis that has been smoldering for decades. 2008 was a wakeup call that the debt of nations, business and individuals had come to a crisis level. It may have been the last chance to deal with the debt crisis in a responsible way, but the reality is it was again papered over with governments pumping fiat or unbacked money into the system and hoping things would go on a while longer. It seems that time has come to an end and the crisis will need to be addressed.

While I am sure the partisans will immediately blame the whole thing on Trump, the reality is this has been brewing for years. 

What we presently are seeing is that the debt of many nations including the United States is its losing credibility as to its their ability to service that debt.  While the United States has always been the safe haven for money in any crisis, the new safe haven is, what has always been the reality, Gold and soon Silver.

While many still scoff at this reality, we have seen  central banks around the world, particularly in the global south and the BRICS nations are amassing physical gold. We have seen gold today blow through $3300 an ounce. This is a symptom of the rejecting of government bonds and national debt by a growing number of nations and individuals. 

The United States has around $8 Trillion of debt to mature this year, much of it currently in the 1% range and will need to be financed in 4-5% range. Then there is the current deficit that will add another $2 trillion. It is expected that $28 trillion of debt will roll over in the next 3 years and will cause a huge increase in the interest payments owed by the government. In the past, interest rates were driven down by gimmicks like Quantitative easing and just plain pumping money into the system by deficit spending. Any attempt to do that now will cause a collapse of the world bond market and very high interest rates.

We see the Trump administration trying to cut spending, increase revenue through trade rebalancing and soon some other possibilities, but it may be too late and too little to stave off what needed to be addressed decades ago. It effect, we are likely out of time and the natural result of irresponsible spending and debt is going to be corrected.

Currently we see foreign holders of debt selling this debt and buying gold, this includes big holders like China and Japan and many other nations, It will soon spread to individuals and possibly investment funds. The only thing that has stopped the avalanche of selling is that many have not identified where to go with their money, the stock market is at high prices, the bond market is losing and now even gold is at record prices. The bond market, always the safe haven is now becoming suspect and with it debt of any kind. 

This situation will translate into higher interest rates and a crisis that may be the worst in modern history.

The crisis will result in new solutions offered. One is the end of cash and the introduction of Central bank digital currency, it will be the ultimate attempt of totalitarian government control of everything, it would ultimately fail as it would stifle the ability of economic freedom and basic transactions. It would likely lead to even worse solutions.

Another option is the return to real money through the use of gold and silver backed money. It is lilley the BRICS group will be the first to go there and it will cause a rush into any such real money. 

That all of course depends if the other option is to stop all such attempts by war or other dangerous attempts to stop the inevitable.