In October 2017, the Institute of International Finance published the official figures for the debt that big international capital had accumulated: 237,000 billion dollars.
That is 192,000 billion euros, or more than three times the annual economic activity of the planet. So more than $30,000 per inhabitant, including newborns, old people and the billion people who live on less than €1 a day.
Figures of course on the rise in 2018 and which were already estimated at 250,000 billion dollars. In addition, the amount of bank derivatives in the world had exceeded 1,500,000 billion dollars, or more than 1,000 times the value of gold held by all central banks in the world (1,400 billion $). Which, in the event of a crash, represented a total liability of approximately two million billion dollars. That is about 2500 times the world GDP (estimated at $80,000 billion for 2018)!
At the same time, the capital of the major global banks only represented between 0.15% and 0.6% of their commitments on these derivatives.
Thus, for each asset, the bill was that much higher, and increased by about a trillion dollars a year.
To get an idea of this speed, think that in the United States alone, between 1776 and 2006, it had reached 8,000 billion, and that it only took eleven years for it to be multiplied by 2.5. .
Snowball effect which explains how, during his two terms, Barack Obama will have succeeded in creating more debt than all the forty-three former American presidents since George Washington!
And yet, all this remains abstract. This is why a few words of explanation on the consequences of this madness will not be too much.
First, as everyone will have understood, the debt will never be repaid, which means that millions of shareholders will find themselves ruined during the greatest financial crash of all time.
So let’s imagine this catastrophic scenario, which is impossible to predict, but as it could occur on an indefinite date…
For starters, governments will continue to pretend they have the solution for a while longer by printing more money, which will only amplify the problem.
Then they will reverse which will lead to hyperinflation, with interest rates reaching 15-20%.
And we see that in 2018 the process has just begun with Wall Street moving away from zero rate lending.
As for real estate loans in France, in June 2018, they posted a rate of 1.7%, while in the USA, they exceeded 4.6% (FED key rate at 2%)…
So soon central banks will lose control over their manipulation of interest rates. And it is only then that the real difficulties will begin…
First, as debt implodes, all bubble assets will collapse. Stocks, bonds and real estate will decline 80-100%.
Either what happened between 1929 and 1932, when the Dow Jones fell by 90%, between 2000 and 2002 when the Nasdaq declined by 80%, or between 2007-2010 when the subprime crisis “surprised” even the secretary to the US Treasury, Mr. Bear Stearns who, by disconnecting Lehman Brothers and its 660 billion in commitments, thought that the shock could be absorbed.
Fatal error which led in a few days to the fall of AIG, the largest insurance company in the world, and then the rest of the structure.
The only difference with what might be expected is that during these three major crashes global debt was lower, and asset bubbles much lower. This made it possible to settle the crisis of 1929 at the cost of the Second World War.
On the other hand, the last two did not solve the fundamental problem, but simply placed some patches to try to remedy the immediate effects, – patches which will blow with the repeal of the Dodd-Frank law and the policy of world economic war desired by Trump – the debt would only increase, but with an exponential effect!
Indeed, if we consider only the 2008 crisis, the economic and financial planet which had generated a debt of 140,000 billion dollars, was saved by a fiscal stimulus policy which enabled global growth to rebound, without however, generate high inflation, since the trend was deflationary.
Moreover, thanks to the action of central banks which flood the markets with liquidity, long-term interest rates have not increased, and have even fallen, sometimes reaching zero or even negative levels. The recovery therefore benefited from a perfect context: low inflation, ultra-accommodative monetary policies and excessively low government bond interest rates.
The problem is that the printing press which literally flooded the debt market (more than 4,000 billion dollars in the United States) did not spare the euro since in 2017, the debt of the European Central Bank (ECB ) exceeded that of the FED with 4.157 billion euros, or more than 4.568 billion dollars, thus becoming, after China, the largest issuer of money in the world. Why ?
Quite simply because since March 2015 the institution has decided to buy 60 billion euros worth of assets per month from international banks holding the debt of European states. Volume increased to 80 billion in March 2016 before returning to 60 billion in 2017.
Here again by printing euros, without guarantee since the recovery of the economy in the euro zone is far from being able to integrate the printing of so many billions of euros.
Europe has therefore followed the process of headlong rush initiated in the United States by the FED. And what other choice did she have?
But today, everyone knows that the increase in this debt, which reached 4,427.5 billion euros, or 41% of the GDP of the euro zone at the time of the balance sheet in November 2017, did not succeed in reviving stable growth. based on a sustainable economy, since European GDP has obviously not increased by 41% in 3 years!!
This means that European economic growth is simply money supply growth, not normal, healthy economic growth.
Thus with the economic war started by the USA and the programmed collapse of the dollar, therefore the crash to come, the debt should be more than 230,000 billion dollars, i.e. more than double that in 2008, but with an additional ” disaster plan” in the more or less long term considering the crash as an ultimately profitable solution for the indebted states and the banks that will have been able to prepare for it.
In other words, at the expense of both small investors and national economies, and therefore taxpayers…
So there would be little more than China with its 3,200 billion dollars of foreign exchange reserves in all currencies and Germany, with its public surplus, which could weather the storm.
For the others, that is to say almost everyone, it would not be possible to restart the machine.
This explains why, in its October 2017 report, the IMF predicted for 2020 a rapid rise in interest rates, a 15% fall in the markets and a 7% decline in real estate prices. So global production down 1.7% on average. “The intensity of the shock is equal to a third of that recorded in 2008. Everyone can imagine the disaster if by chance the markets unscrew more significantly. »
And of course everyone knows that these markets WILL unscrew since the debt has increased out of control…
Moreover, even if the Dow Jones has been rising for 8 and a half years, going from 6,000 to 25,000 points. Or 400% increase, again. But here again we blithely “forget” the lessons of history which reminds us that the longest stock market rise in history lasted only nine years, between 1920 and 1929…
Thus, if we are to believe the most basic logic, it would therefore be a question of getting rid of, in the very near future in view of what is being prepared, approximately 2 quadrillion dollars of debts, unfunded liabilities, and derived products.
Which means 29 times the world’s GDP. In two words: The end of the financial system as we know it, since paper money, not being supported by any concrete standard, would be returned to its initial value: A piece of paper.
And one imagines the crowds gathering in panic in front of closed banks, or empty ATMs, to claim not their savings, i.e. a lifetime of work, but just a few pennies, in order to survive.
This helps to understand why today people are trying to persuade us to get rid of physical money, to use only virtual currency.
You might as well avoid these painful scenes, and unnecessary deforestation…
Fortunately, we are reassured! Such a disaster would really only affect the poorest, since the Bank Recovery and Resolution Directive (BRRD) came into force on January 1, 2016 and was unanimously ratified by all governments and parliaments. members of the OECD, allowing bankrupt banks to settle their debts by legally taking over the bank deposits of its savers, was capped at 100,000 euros!
The problem obviously being that if the banks go bankrupt, 100,000 euros will not be worth much…
Another “happy” consequence: The implosion of debt and assets would lead to the largest transfer of wealth in history: The middle-rich would lose everything, while the poorest would lose only their debts. Thus, in this general misery, only the richest would come out of it. Which unfortunately would not go without posing some problems here again because if today one in ten people in the world live on less than 2 dollars a day, Bill Gates, the world’s first fortune, and even if he continues to distribute his wealth as generously as he has for some years, pays out a million dollars a day for 2738 years to spend the 1000 billion dollars he should have if he lives to be 85.
Which should even give him the possibility of withdrawing to Mars with his whole family, in the event of a world conflict…
Because make no mistake, this is what threatens us
Especially if we integrate into these highly threatening data, the consequences of global warming and massive population exoduses, and therefore the series of conflicts, revolutions and humanitarian disasters of all kinds that these will cause.
Diverse and varied upheavals that will push, because here we are no longer in the field of foresight but of certainty, each state of influence, thinking above all of its survival, to defend its particular interests by force.
And we understand that in recent years the military budgets of the richest states have literally exploded, since in 2015 military spending in the world, which until now had stagnated, rose to 1676 billion dollars, or 2.3% of GNP world, registering a one percent increase in one year and that these do not stop increasing, with at the head of the biggest buyers: The United States with 36% of world military expenditure (612.5 billion dollars and 7 500 nuclear warheads), China, the second largest defense budget, which between 2006 and 2015 multiplied by 132 its budget (215 billion dollars and 300 warheads). Russia with 76 billion and 8,500 nuclear warheads. But also the European Union, which has planned to increase its budget by 8.6% from 2016.
And why spend so much money on weapons, if not for the purpose of using them one day?…
A proposal which is undoubtedly not beyond the understanding of a Trump, who could thus try to impose by arms the American hegemonic will on the world, in order to compensate for the loss of economic power, and therefore political , greenback.
Because who does not know that a “good war” will always remain a magic lever to regain a popularity rating in danger after a monetary collapse?
Besides, isn’t this how Roosevelt and Wall Street reboosted the American economy by unleashing the Second World War after the crisis of 1929?