Stocks & Bonds

Global Debt Reaching Unsustainable Heights – Systemic Collapse Imminent

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Simply put, to prop up living standards, nations around the globe have been spending more money than they could collect in taxes. They have financed an over 35 year spending spree by issuing bonds.

In the last few years, the debt binge has been increasing at a monumental rate. Debt levels are reaching dangerous, never before seen heights. Interest rates have never been lower in contemporary history.  According to the Bank of International Settlements (BIS – The Central Banks Central Bank) debt to GDP levels are now over 260%.

Rates are now so low, in fact, 25% of European government bonds are at negative interest rates. There is now literally nowhere for rates to go but up, crushing a 35 year bull run and sending the financial markets into chaos around the world.

 

As many a politician will tell you, that this is “transitory or temporary”. Yeah right! The sovereign bond bubble has now pushed over $100 Trillion becoming the biggest bubble in the history of mankind.

The US is squarely at the center of this bubble. Issuing nearly $1 Trillion in new debt at the very end of 2014, for the sole purpose of paying off old debt that it cannot afford.

Currently, the interest payment on the over $18.2 Trillion in US debt outstanding is $526 Billion. For example a 1% interest rate increase would add over $100 Billion to the US debt service load.

Any return to a historical normal interest rate environment will implode the bond market and cause a systemic collapse.