The Coming Financial Panic and the 2020 Election
The comments below are an edited and abridged synopsis of an article by David Stockman
We are near the top of the ‘everything’ bubble. Stockman recommends recognizing that this is the most extreme, exaggerated, severe financial bubble in world history. It will inevitably collapse, and there will be massive losses, even greater than occurred in 2008 and 2001.
The first thing to do is to stay out of the financial market—stocks, bonds, and everything else.
When the big correction comes, there are going to be massive losses, and the panic will be great. All correlations will go to one, and everything—good, bad, indifferent—will fall.
You can’t be saved by picking high-yielding stocks or conservative blue chips or stocks that provide daily necessities like food—it won’t matter. Everything’s overpriced right now because of this huge financial distortion.
The time for speculation is over. We’ve had 30 years of central bank subsidized speculation. We’re going to go into the time and era for capital preservation, and that means the highest priority is to not lose money.
Up for discussion: central banks (not your friends or saviors); the Federal Reserve; trade wars and their effect on the markets; Elizabeth Warren as US president; record deficits under President Trump; and the cost of the welfare state.
“The real debt of the country today is not the $22 trillion that’s on the books,” said Stockman. “That’s backward looking. It’s really $42 trillion. That’s because we have $20 trillion more baked into the cake under almost any scenario you can look at over the next decade, based on these factors I’ve just enumerated.”
“Now, $42 trillion of debt on a GDP that might get to be, in nominal terms, $27 [or] $28 trillion by then (but probably less), that’s a 150% debt-to-GDP ratio. I just don’t see how you get out of that box.”
“We’re in a demographic and fiscal dead end. It’s a very dangerous prospect and one with no obvious answer on how to escape.”