Next crash Will Be ‘Worse Than The Great Depression’: Experts
The comments below are an edited and abridged synopsis of an article by John Aidan Byrne
Ten years ago, it was too-easy credit that brought financial markets to their knees. Today, it could be a global debt of $247 trillion that causes the next crash.
After a decade of escalating US household debt brought on by low wages and the national debt more than doubling over the same timeframe ($21 trillion), debt could soon put the brakes on America’s economic recovery.
The economic stats: US household debt of $13.3 trillion now exceeds the 2008 peak; student loans outstanding have skyrocketed from $611 billion in 2008 to around $1.5 trillion today; auto loans (nearly $1.25 trillion) have exceeded the 2008 total, while credit card balances are just as high now as before the Great Recession; meanwhile, global debt is now $247 trillion, up from $177 trillion in 2008 (close to 2.5 times the size of the global economy).
Insurmountable debt is the problem. The huge sums today certainly fed the boom times, but since it must eventually be repaid, the tipping point will come when a wave of defaults by overwhelmed borrowers, potentially squeezed by rising interest rates, leads to a widespread reduction in spending and incomes.
Earlier this year, Goldman Sachs said the fiscal outlook for the US was ‘not good,’ and could threaten the nation’s economic security during the next recession.
Experts dismiss the latest batch of positive indicators, including the lowest unemployment rate in a generation, soaring business confidence spurred by President Trump’s tax cuts and the Dow hitting record highs, and predict a brutal deflationary spiral ahead in the next downturn.