Who’s Most Afraid of a Latin American Debt Crisis (Apart from Latin America)? | Wolf Street
— Read on wolfstreet.com/2018/05/12/whos-most-afraid-of-a-latin-american-debt-crisis-apart-from-latin-america/
Soon to be a contagion
QUESTION: If governments have been borrowing without limit since world war 2, are you saying that there is some line that is cross in debt to GDP that results in default? Thank you JU ANSWER: No. The debt to GDP ratio is interesting. The USA is at about 103% and China is at 250%. The ratio is at 180% for Greece and France is at 96.5%. If we used exclusively these numbers, China should be worse than Greece. If France’s debt is less than the USA, then why is the French economy doing so badly? So what is the real issue that causes defaults? To answer that question we need to introduce currency. France and Germany were less impacted by converting to the Euro than Greece, Italy, Spain, and Portugal. Why? Currency Inflation! Southern Europe had always issued debt and over time you were paying back with cheaper currency. The USA is insulated in that manner. $1 million in 1930 could buy 1,666 Cadillacs. Today, financed for 39 months, the cost of a Cadillac is $26,700, which means that $1 million will only buy 37.4 cars. The debt issued in 1940 has been devalued over time. This is how debts have escaped the theory that a national debt has some limit. Then countries like Germany worry about the debt so they raise taxes to keep the ratio down below 70%. In taking that approach, they lower the standard of living of their population to support the government. The government spending as a percent of GDP in Germany has run on average about 46.5% of GDP compared to the USA average at 36.57%. The higher that ratio the lower the standard of living. It also warns that there is a limit to taxation before you reach the threshold of revolution – remember No Taxation without Representation? The debt crisis we are currently in has been accelerated by two factors: deflation making past debt more expensive and artificially low interest rates Greece converted its past debt to Euro which then doubled in value as the Euro rallied from 80 cents to $1.60. That meant the past debt was now double in real terms and there was no possible way Greece could pay such a load. In real terms, the debt rose relative to its GDP because you converted the currency base. The crisis we face globally is that as interest rates rise, the servicing of the debt will rise exponentially. This will impact everyone around the world. Now, if the dollar rallies sharply because of the structural crisis in Europe and the turning down of the economies elsewhere, then the past debt of the USA will rise in real terms as was the case with Greece. Then add to this Cauldron and stir gently rising interest rates. Shabam! You reach the threshold of a debt crisis!
— Read on www.armstrongeconomics.com/world-news/sovereign-debt-crisis/why-national-debts-eventually-default/
Very good analysis
QUESTION: Dear Marty, due to 5,000-year lows in interest rates, in 2011 the US was able to triple the debt but keep the payments the same as in 1998. With interest rates rising (but still historically low) in 2017 the US paid the highest interest payment on the debt in history. Could you please elaborate on that? Thank you for sharing your wisdom. Kind regards, M ANSWER: This is going to be a major topic at the WEC. This is a major time bomb that amazingly nobody seems to be paying attention to. Rates are going higher for they need that to help the pension crisis. The USA is nowhere as bad as it appears in Europe from a debt perspective. This whole mess is going to explode in our face and this is going to be the serious trend going into the next ECM turning point. The debts of governments around the globe are going to move up exponentially. This is very serious for some will raise taxes to try to keep the game going but that will cause even more deflation. I cannot express how SERIOUS this is. While everyone is looking at the stock market, others at the dollar and gold, they are missing the greatest threat to civilization since the 12th century. Interest rates began to rise as soon as we passed the peak in this 8.6-year was – 2015.75. The Fed raised interest rates for the first time once the ECM turned. The number of institutions calling and governments has been rising ever since the ECM turned. This is not going to get better and it is not going to just fade away. Sorry, if we keep our eyes closed and even hide under the bed, it will not matter.
— Read on www.armstrongeconomics.com/world-news/sovereign-debt-crisis/big-bang-is-here-and-ticking/
Debt bomb fuse is getting short
The State of the American Debt Slaves, Q1 2018 | Wolf Street
— Read on wolfstreet.com/2018/05/08/consumer-credit-auto-revolving-student-loans-q1-2018/
Trump’s move to cut some budget cruft is welcome, though we’re going to need a lot more like it.
— Read on patriotpost.us/articles/55824-rescinding-$15b-one-small-step-for-budget-restraint
Small steps
Bank of Canada: 8% of Canadian Households Owe More Than 20% of the $2.1 Trillion in Debt | Wolf Street
— Read on wolfstreet.com/2018/05/05/bank-of-canada-8-of-canadian-households-owe-more-than-20-of-the-2-1-trillion-in-debt/
Sad for them
The Cologne Institute of German Business sees in the planned European deposit insurance is simply incapable of proving protection against a bank crash in Europe. The EU deposit guarantee is simply not practical under any concept of austerity. The Eurozone still has inherent significant risks in the balance sheets of European financial institutions. This is primarily because where the USA took the bad loans from the banks and stuffed them into Freddie and Fanny, in Europe, the bad loans are still on the books of the banks. Systemically, this has been the leading problem why Europe has been unable to recover and Quantitative Easing merely robber savers of their income and it failed completely to stimulate the economy. Banks were still reluctant to lend and people would not borrow if they did not have confidence in the future. The proportion of bad loans is so different between the individual banks that a joint deposit guarantee leads to a permanent transfer mechanism. This is a complete disaster and pulls the EU apart. As the worse banks are in Southern Europe, Northern Europe will see this as a bailout for the South. Therein lies the very crisis and why the structure of the Eurozone from the outset has been such a complete disaster. All national debts of member states should have been consolidated and that should have become the European National Debt. Thereafter, member states should have been on their own. But that common sense design was ignored for political purposes. Any consolidation of debt was seen as a bailout for weaker member states. This inherent disparity simply remains intact with no solution in sight. The recapitalization costs for eliminating non-performing loans (NPLs) just in Cyprus will still consume 2.4% of GDP in that member state. In Greece, any recapitalization will cost 2% of GDP and in Italy 0.8%. The disparity among members smacks of transfer payments which have been a sore subject behind the design of the Euro. A closer look at Italy reveals that more than 10% of the balance sheets of Italian banks constitute bad loans. The cost to bailout Italy is put at €189 billion while Spain comes in around €100 billion and even France will be €85 billion. In Germany, the bad loans amount to about €48 billion While nobody wants to talk about it, the obvious issue is why has Deutsche Bank not been merged with Commerzbank? The bad loan problem a derivatives problem would simply not be solved even by such a merger. Is it any wonder why politicians have looked to bail-ins rather than bailouts?
— Read on www.armstrongeconomics.com/international-news/europes-current-economy/cologne-institute-of-german-business-warns-of-deposit-protection-may-not-survive-in-europe/
Scary
SMOKING GUN: 2021 – THE YEAR OF COLLAPSE — Lynette Zang
— Read on www.bitchute.com/video/EKja6BB6Z6s/
Watch this
China is on its way to reaching the title of the Financial Capital of the World post-2032. However, that is also NOT going to be accomplished all on its own. In part, this is the moving trend and the shift our computer has been forecasting also because the West is in a Sovereign Debt Crisis and by raising taxes and imposing stiff regulations to try to keep the game going, GDP in the West will decline. Nevertheless, China has some adjustment it must go through before it reaches that goal. It will surpass the EU, but the EU is hard at work of just trying to protect the jobs of bureaucrats rather than to actually make Europe a better place to live. Right now, China’s Debt to GDP stands at 250% mainly because to stimulate their economy, they actually lent money to people. The Western government bought their own bonds back to the “indirectly stimulate” the economy which never made it to the people. This is why Europe is still in deep trouble. The US took the bad loans from the banks and stuffed them in Freddie & Fannie. The EU left the bad loans on the books of the banks because it was seen as a bailout for Southern Europe. Now we have a banking crisis in Europe that never ends. China’s debt problem is quite different. On the back of a boom in property prices, household borrowing has been climbing for the past 10 years straight. We are now approaching the correction point in this trend. The borrowing had expanded at a pace that exceeded the biggest speculative booms in the West. Now, some $6.7 trillion in personal debt also exists and this is now 50% of GDP. Private debt is now approaching crimping consumer spending power and therefore lies the recession ahead. We will be focusing on China at the Singapore World Economic Conference in June 2018.
— Read on www.armstrongeconomics.com/international-news/china/china-is-there-an-asian-debt-crisis-on-the-horizon/
The entire EU Crisis began precisely on schedule on the Political Pi Turning point from the major high in 2007. Precisely on the day of the ECM turning point, April 16, 2010 (2010.29) Greece notified the IMF it was on the verge of bankruptcy. By April 22nd, the Euro fell to near year-low levels amid concerns about Greece’s debt crisis. The IMF activated the loan facility and Greece received its first €45 billion on April 23rd, 2010. Then on May 9th, the IMF approved a bailout package for Greece with the largest loan and exceptional, fast-track access. Of course, that turning point of April 16th, 2010 was also the first time the SEC charged Goldman Sachs with outright FRAUD is selling its Mortgage Backed Securities. In dealing with Greece, the German head of state Chancellor Angela Merkel, had promised the German taxpayers that any loan to Greece they will be held to the fire and forced to repay. The polls were turning hard against Merkel as she was being bashed in the world press for Greece had forgiven Germany’s debt after World War II, but Merkel refused to provide any relief for Greece because of her campaign promise. The divert the press from here hardline policy on Greece, Merkel then summarily announced that she would take the refugees from Syria with open arms. That then began the European Refugee Crisis and Merkel then force the rest of Europe to share the burden she created unilaterally. The entire European Refugee Crisis was created by Merkel, and this has been at the center of the crisis which is tearing Europe apart at the seams. That came as the next ECM wave turned from its peak 2015.75. Now as we approach the next political Pi Turning Point due on November 21st, 2018, which will be 8.6 years from when the Greek debt crisis began, the EU Commission has demanded from the Eurozone states that debt relief should be provided to Greece. “We need to find a mechanism that will ease the debt burden that is on the Greek people today,” EU Economic Affairs Commissioner Pierre Moscovici said Friday at a meeting of Eurozone finance ministers in Sofia. The creditors would have to show “solidarity with Greece” in order to secure the recovery of the long-term crisis country. The Greek government creditors addressed by Moscovici are the taxpayers from those Eurozone states that had granted loans to the country in recent years – especially German taxpayers. With these loans, the Greek government paid the debts that it had with major international banks. All the loans in Christendom to Greece will not solve the debt crisis. The design of the Euro was seriously flawed. They implemented only a single currency and left all member states with their national debts instead of consolidating them. Then the Euro rose from 80 cents to $1.60 and suddenly Southern Europe saw their national debts double in real value. It was no different from borrowing to buy a home in Swiss franc to save interest and watching the Swiss double in value and now you owed twice as much on your home. Debt relief of 50% is needed on the entire national debt – not just the loans since 2010.
— Read on www.armstrongeconomics.com/world-news/sovereign-debt-crisis/greece-the-debt-crisis/
John Barleycorn 
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