Debt & Deficits

There is a strong correlation – both historically and logically – between interest rates and credit card debt delinquencies. As rates rise, outstanding debt burdens become difficult to service so, until the Fed reverses their tightening, things will only worsen for credit-card users from here. That’s why a serious question needs to be asked: with auto loans, student loans, and credit card delinquencies all on the rise – and we’re not even in a recession – what can we expect from here?

The U.S. and global economies are choking on a massive amount of debt. While Wall Street and the mainstream financial media continue to rationalize the skyrocketing debt as merely the cost of doing business, the disintegrating fundamentals point to an economic catastrophe in the making. [Indeed,] when the massive amount of debt finally implodes, it will take down the values of most stocks, bonds, and real estate. This is not a matter of "if,” it’s a matter of “when” and it seems as if the "when" is quickly approaching.

The auto market is showing signs of incredible worry. Delinquent subprime auto-loans are higher than they were in the last recession. What’s interesting – and worrisome – is that consumers are defaulting on subprime auto loans when the economy is supposedly doing ‘very well’.

Will the supposed trade war between the U.S. & China escalate to the level of disrupting significantly the economies of America and China—and, indeed, the world? [No, not by a long shot, as this article clearly demonstrates.]

We have lived through a credit induced holographic standard of living considered to be “normal”. Never...has a genuine lifestyle been funded continuously on credit. Each attempt always failed miserably. The only difference today is that more of the world is involved along with more credit used than ever before. The only logical conclusion is this latest credit experiment to fund lifestyle will fail on a far grander scale than ever before!

Like many other countries, China is going down a road of unsustainable spending. This may mean that China’s boom may see a dramatic fall, and consumers may be saddled with debts they have no way of repaying.

Almost all governments and commentators have lined up since 2009 to support the money-printing policy but the hard bit happens now as it starts to become obvious that the policy has failed. We now have all the debt, but we don’t have the growth that would enable it to be paid off

The math is simple. The more a country increases its debt to simply stay afloat, the more like the increasing debt will cause a tightening of credit. The next step is a burst bubble and economic crisis. This is what happened in 1929 and in 2007, and it’s happening now.

Trump is following through on a long-time threat that he says will punish China for intellectual property infringement and create more American jobs. Effective this Friday, the Trump administration will be imposing tariffs on up to $60bn of Chinese goods, or roughly 13% of goods imported from China and 2.75% of total US goods imported according to Danske Bank.

Many are criticizing the Donald for imposing tariffs on some commodities such as steel and aluminum but, while he has a valid argument for his thinking, our overall trade deficit is unlikely to change. Indeed, it can not change without a serious economic depression and collapse. Let me explain why that is the case.