Reversing the 2008 crisis and preventing the collapse of the too big to fail has cost almost $80 trillion in new debt… which are now catching up with us because the interest rates were kept artificially very low.
Logically interest rates must increase proportionally to the households/government indebtment. Making credit more expansive and thus preventing from raking up more debt. When it does not, it is called “economic manipulation” which may seem to work for a while until time comes to inflate with new debts again or let the debt bubble just pop and get prepared for the worse. Of course the damage is too proportional to the time it took to let it pop, the more one waits, the worse it gets.
Most people do not understand – or remain stubbornly oblivious to – the debt-inflation inner workings because they have always seen that after the bust, a boom is to be expected, but every boom paves the way for a bust. What gives???
How about avoiding to create bubbles in the first place? Because after all only insiders and their connections really profit from the boom-bust cycles. They know when to get in and out. The hardship is for 85% of population, which is always taken for a ride.
A bubble-free economy – and thus with no bust – would lead to a zero economic sum game, with no losers nor winners because people would then cooperate a lot more instead of senselessly competing at their own expenses. Passion about what one does would then be seen a the only real currency, and passions would complete one another to the point that the need for money would gradually vanish.
But first: how ready are people to let go their dreams of big mansion and fancy sport cars, understand that government and corporate borrowing is detrimental to their health, that monetary competition does not and will never work for humans, that wealth cannot be created nor destroyed but merely changes hands, that seeking to get rich is but a hypnotic mantra requiring society being dumbed down?
Then we have the “derivates time bomb”, but that will be for another jaw dropping blog. Even if bitcoin ever reaches $100K, it won’t be enough to buy our way out of debts.
Financial markets could be over-heating, warns central bank body Bank for International Settlements’ quarterly health check warns global economy resembles era just before financial crash
Investors are ignoring warning signs that financial markets could be overheating and consumer debts are rising to unsustainable levels, the global body for central banks has warned in its quarterly financial health check. “The vulnerabilities that have built around the globe during the long period of unusually low interest rates have not gone away. High debt levels, in both domestic and foreign currency, are still there. And so are frothy valuations…
World faces wave of epic debt defaults, fears central bank veteran Exclusive: Situation worse than it was in 2007, says chairman of the OECD’s review committee
The global financial system has become dangerously unstable and faces an avalanche of bankruptcies that will test social and political stability, a leading monetary theorist has warned. “The situation is worse than it was in 2007. Our macroeconomic ammunition to fight downturns is essentially all used up,” said William White, the Swiss-based chairman of the OECD’s review committee and former chief economist of the Bank for International Settlements (BIS).
Global debt has hit a record level in the first quarter of this year, mainly driven by emerging markets, raising questions of whether there will be another financial crisis in the near future. Data from the Institute of International Finance showed that global debt reached $217 trillion in the first quarter of this year, or 327 percent of gross domestic product.
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