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moneymetals

The OTHER Debt Bubbles: How Private Sector Debt Could Trigger the Next Financial Crisis

The $22 trillion official national debt is a much discussed problem, even as politicians exhibit zero motivation to do anything about it. But as big an economic overhang as it is, government debt isn’t likely to trigger the next financial crisis.

Yes, servicing the growing federal debt bubble will depress GDP growth, cause the value of the dollar to drop, and raise inflation risks. But the bubble itself won’t necessarily burst – not anytime soon.

Debt

As long as politicians face no political consequences for deficit spending, and as long as the Federal Reserve keeps the Treasury bond market propped up… then many more trillions can be added to the national debt.

Meanwhile, more fragile debt bubbles exist in the private sector. Unlike government debt – which carries the implicit backing of the Fed’s unlimited printing press – debts incurred by corporations, investors, consumers, and students can default.

Globally, there exists $250 trillion in debt against economic assets of around $100 trillion. The notional value of all derivatives now approaches a quadrillion dollars.

It’s been called the “everything bubble”… and it could soon lead to the “everything bust.”

U.S. household debt rose to a record $13.5 trillion in the fourth quarter of 2018. Mortgages, student loans, car loans, and credit cards represent enormous burdens even during a good economy. These burdens will prove unbearable for millions of Americans in the years ahead.

Check out the full article here: https://goo.gl/y1cDk

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