The Triple Whammy of Bonds, Stocks & Property Falling As Debt Bubbles Go Well Past The Tipping Point
The Financial Crisis in the US are a consequence of too much debt and too much risk, among numerous other factors, and the whole house of cards came down.
Now, after years of experimental monetary policies and huge amounts of deficit spending by governments , public debt has ballooned. Our gross national debt recently eclipsed $28 trillion with no end to the borrowing and spending in sight.
Corporate debt was also already skyrocketing prior to the pandemic. US companies now face the highest levels of debt on record — more than $10.5 trillion, according to the Federal Reserve and the Securities Industry and Financial Markets Association, or SIFMA. All of this is driven by loose Federal Reserve monetary policy designed to drive borrowing.
The Corporate Bond Market’s is a $10.5 Trillion Debt Bubble. Private sector debt holders can’t create money like the government can to pay their debt.
In fact, it is perversely the debt issuers (banks) that get to create the money out of thin air that the borrowers have to pay back with real money.
As debt soars, it takes money out of the real economy, which eventually crushes the debt holder’s ability to service the loan. You add speculation and leverage to the mix, and you get positive feedback that works in both directions.
The debt bubbles are well past their tipping points already and are being held up by absurdity low-interest rates that once again crush the real economy by rewarding speculators over savers and hard work.
Once the interest rates rise, It all comes crashing down like a house of cards. If they keep them low for much longer, there will be revolution due to growing inequality.
Eventually, we are going to have to swallow our medicine. Without the corporate bond market, how could CEOs of failing companies still afford their million-dollar salaries?
It’s more about propping up zombie companies that then rotate performance criteria to reward executives. The bonds allow poor managers to keep on acquiring companies to increase market share but not significantly increasing core profitability or actual value.
The confidence displayed by arrogant egotists masks incompetent decision making and they all huddle together in each other’s boardrooms, ensuring the game is never exposed.
The triple whammy of bonds, stocks, and property falling is coming.
The pandemic just halted the timeline and increased the financial devastation coming, given the focus on insanely emerging with identikit government policies.
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