The Coming Great Global Reset
The comments below are an edited and abridged synopsis of an article by Richard Mills
In the first quarter of 2019, global debt hit $246.5 trillion. Lower interest rates saw governments go on a borrowing binge, ramping up spending and adding $3 trillion to world debt in Q1 alone. This reverses a trend of reducing debt burdens that started in 2018, when global debt reached its highest on record ($248 trillion).
The first-quarter spending spree brought the debt to 318% of global GDP, the first quarterly increase in two years, amid record levels of corporate and household debt in many mature markets.
Finland, Canada and Japan saw the largest increase in debt-to-GDP ratios of all countries in a one-year period. This is alarming, because high levels of debt put countries in a vulnerable position in the event of a downturn and could endanger the world’s economic recovery.
Meanwhile, the US is accumulating about the same amount of debt—currently $22 trillion—as its annual economic output. Each year, another trillion dollars gets added to the national debt.
Rising interest rates compound the problem. This can’t go on forever.
The dollar could collapse under the weight of unmanageable debt, triggered, say, by a mass offloading of Treasuries by foreign countries that currently own about $6 trillion of US debt. This would see the dollar crash and interest rates would soar, choking consumer and business borrowing. Import prices would skyrocket, and consumers would suffer. Business confidence would plummet, mass layoffs would occur, growth would stop, and the US would enter a recession.
Countries that sold their Treasuries would then face a major slump in demand for their products from US consumers. Before long, the US recession would spread to the rest of the world.
The US is moving towards socialism. The only way for investors to protect themselves against a massive financial shock radiating from the collapse of the US dollar under a mountain of spending-fueled debt is to own gold.
Up for discussion: nothing, not even the dollar; lasts forever; global reset; the dollar’s wane; and runaway spending.