Next Financial Crisis Has Already Started…And We Have Just Begun to See the Results of our Irresponsibility
L. Todd Wood / Western Journalism
The chickens are coming home to roost in Europe and the United States, and the next financial crisis has already started.
We just don’t know it yet.
Why are gas prices plunging? Why is the stock market correcting? Why is the Fed worried?
The answer is slowing economic growth, all over the world. Western societies have built up mountains of debt that they don’t have the will to pay back. Their economies could probably handle the huge debt service load if they decided to do so, but their populations don’t have the will to pay.
The lure of free stuff is just too strong. We have reached a tipping point where governments are elected by the people based on how many freebies they give away. Unfortunately, we have now run out of other people’s money.
Markets are a forward looking indicator. The reason the equity markets are collapsing (besides being way overvalued via a Fed induced bubble) is simple: the overwhelming debt of Western nations is curtailing economic growth. The government misallocates capital and it has direct consequences for the private sector economy.
As debt service payments rise (the U.S. sovereign debt is well on its way to $30 trillion), other priorities that could add value to the economy will be starved out of the budget. It’s a vicious cycle.
So why has the dollar been rising?
The answer is that the USD is the only game in town; it’s the cleanest shirt in the dirty clothes pile. Investors have nowhere else to go.
In a recent newsletter to its clients, precious metals dealer Birch Gold Group stated as much: “The greenback’s rise also reflects confidence in the United States economy and concerns about the prospects elsewhere.” They go on to say, “On Tuesday, the International Monetary Fund lowered its estimates for global growth this year to 3.3 percent from 3.7 percent, and also reduced its forecast for 2015 to 3.8 percent. Europe got some of the biggest reductions with only 0.3 percent expected growth for the Eurozone economy. In contrast, the forecast for the United States is 0.5 percent.”
But what happens when the world sees that America won’t pay back her debt?
The economic numbers coming out of the United States have been misleading. Yes, the job numbers have improved; but the economy is generating part-time, low-wage employment. Almost 100 million Americans have left the workforce.
This is not the consequence of growing, robust economy. It is the consequence of a sick economy supported by the Fed’s sugar-high, which is slowly being removed. As the Fed stops its bond buying to create demand for U.S. treasuries to keep interest rates low, the American economy will come under further pressure.
Obamacare will soak up additional funds from the federal budget as outlays are scheduled to increase exponentially over the coming years. The next big bailout will be for the insurance companies participating in Obamacare. The risks and threats to the U.S. economy are great, and we are not dealing with reality.
The next financial panic has already started. The federal budget will grow, and the deficit will grow, while the world economy is slowing.
Read more at Western Journalism:
http://www.westernjournalism.com/next-financial-crisis-already-started/
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