The Bubble Explodes Again….

Several market pundits have recently reported on a topic that is not something everyone wants to openly discuss. That is the ballooning amount of debt in the world has reached monumental proportions.   According to one study the overall amount of debt outstanding is over $200 Trillion.   (Yes you read that right) That number is so staggering that it means it cannot be repaid in our lifetime. Some of it may never be repaid or at least it may take generations to get there. Does it bother anyone that no one cares?

Our global society has become one looking for immediate gratification with the likes of Amazon and Alibaba being able to sell and ship anything to you within twenty-four hours. No one in is looking at whether or not this race for consumption has an overall global economic effect in the short run as well as the long run. That effect is to render the economy pushing for ease of sale and distribution so dependent on credit that it will eventually fall apart under its own weight.

If we turn the clock back and look at the last financial crisis, while some say it was not easy to predict what happened, when you look at the data now all the signs were there for a complete meltdown. The market turmoil was predictable to a large extent.   So that has led some experts to question the increasing global debt numbers. Why you may ask? Because we have continued to say here at the Ribotsky Institute, the warning signs are there again.

It is not a question of if; it is a question of when….

If we look at national debt like a business we come up with a stanch reality.   As you increase your level of debt just to remain in business, the more probable it becomes that the increase in the debt will cause the business to contract. The same is true with the overall markets. The level of severity of such constriction results in the something like the Great Recession in 2008.   Or maybe even worse.

Since all economies are virtually global today then how their own credit markets react may not mean a definitive global meltdown. But it will mean that some economies will not be so resilient. What is adding insult to injury is we are aware of the warnings but we are not paying attention to them.   Inflation will certainly be on the rise as other countries simply write down credit or wipe it away.

Where we disagree with some economists is the globalization of the credit markets. Some economists think that global trade has been reduced after the Great Recession. We here at the Ribotsky Institute feel that is a “fake news” farce.   Global trade and global trading are as big as they were if not larger. Interdependent markets and intermingled pieces of economies are so prevalent in today’s market it is quite nerve racking.   We see this time and time again when the markets react similarly based on specific news. What will the result be, no one is quite sure. But if history is any judge in 2008 and 1929 then we know the bottom will fall out from under the current over leveraged markets.

It is safe to say everyone that there will be another crisis in our future, the question is, is when and with what catalyst.   If you are prepared though, you will not only save money for you and yours but you may actually be able to take advantage of the instability and make money like a few were able to do during the Global Financial Crisis.

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