We’ve all heard the phrase “too big to fail”. But what the Financial Crisis and events in 2008 showed us is that there is no such thing, especially when it comes to banks and Financial Institutions. The events from 2008 have also revealed the looming and rapidly-growing shadow of the global debt. Looking at data from the International Monetary Fund (IMF), the global debt has reached the honestly unthinkable level of $184 trillion.
Quick equations reveal that every single person alive today, currently “owes” roughly $85 000 to the Central Banks. The figure is two times larger than the global average income per-capita. The country that unsurprisingly holds the most debt is the United States. According to the US Debt Clock, the country has almost $22 trillion national debt. That would mean that the United States owes about 11.5% of the world’s total debt.
Global Debt Crisis
A multitude of factors have contributed to this incredible rise. The way the 2008 crisis was “handled”, didn’t help the country, but rather intensified the problem. While many of the mass media outlets will repeatedly state that the country has enjoyed a period of economic growth, the numbers point out to a frightening future.
Mortgages, credit and student loans and problems with the health care system have all been pivotal into the forming of this incredibly large debt bubble. Many experts believe that the situation will probably take a few decades to resolve and will have devastating consequences on the country’s long-term economic growth plans.
Last year the US stock market had one of the strongest rallies in history. The DOW shot up from $19,763 to around $26,000. This is more than a 26% increase for a period of 12 months. Rapid growth and strength was demonstrated by the market and this allowed both individual investors and corporations to start spending and acquiring all sorts of loans. Consumer confidence naturally inspires more spending and this is completely normal in a bull market.
Homes were among the most purchased by individuals who previously could not afford the high-interest mortgage loans. This of course resulted in the credit card debt in the US going over $1 trillion for the first time in history. Another huge factor for the massive debt are the famous student loans. Just last month alone, they have reached a new record surpassing $1.4 trillion.
A very important issue about the student loans is that they are guaranteed by the US Department of Education. This means that if a nation-wide recession resulting in mass youth unemployment occurs, the result will be even more troublesome for the US government. Relations with China are also escalating and the trade-war is anything but helpful towards the US national debt. This November saw a rapid decline in DOW and S&P 500’s performance resulting in a price decrease between 10 and 30%.
Most tech companies also took a 15%-40% decrease for the last 3 months. With the global debt crisis expanding at an alarming rate, the market is also becoming more unstable. Investors are starting to panic and a little trigger might become the reason for a chain-reaction and a Financial and Debt Crisis that will be talked for decades to come. The Crypto markets can become a great hedging tool for a lot of bad things in a recession, so i highly recommend to watch the Crypto market for investment opportunities!