By Don Koenig with 2020 update
2020 update - I actually first wrote this article about world debt back in 2000 and I have been updating the figures and inserting new information along the way. Since I wrote the article, world governments have taken unforeseen criminal actions to push off the inevitable world debt crash. The reserve banks are printing money which historical brings about inflation but through shady policy they are also keeping interest rates artificially low. National reserve banks of some nations have even gone to negative interest rates. All the national banks now have negative short term interest rates if you account for real inflation.
Since 2008 the policies of the national reserve banks have insured that savers would be robbed of their wealth through interest rates lower than inflation. They enacted such policy because many nations cannot pay normative interest rates on their national debt. They will continue this policy until they either run out of other people's money or the value of paper money is inflated away like is now happening in Venezuela.
Now with the recent Covid-19 shutdowns and bailouts many nations are taking on huge amounts of new debt that they will never be able to pay off. This will only hasten the economic crash caused by debt.
When the inevitable debt crash happens it will now bring down the whole world economic system. Basically, that means that anyone that does not have tangible secure assets will lose most of their wealth and there will be little possibility for any national government to bail out the loses.
If you are in the stock market right now, it might be wise to get out now, or you are likely to lose much of your savings like so many did in the crash of 2008. The drop could be far worse than the last crash.
Do market conditions in the world justify the present stock market? I think not. It has nothing to do with any recovery. It is just more gambling on expanding bubbles. The EU nations are in dire straights, they still some of the highest unemployment numbers in over one-hundred years. Japan has not had any significant growth in almost two decades and their population is rapidly aging and retiring.
The expansion in China is in big trouble. They are very near a debt crises. They are way overbuilt and that overbuilding was done by those borrowing from shadow banks. The unemployed of the world cannot afford to keep buying their goods. Nations know they need to protect their own jobs or there will be great social unrest. Therefore, there is great pressure to do something about the cheap exports coming from China. This overbuilding by China is built on borrowing and that is likely to put them into crisis when builders can no longer borrow more money to keep the job's expansion going. China does not have social welfare safety net programs like the West. China needs to keep the people in the cities employed or there will be riots and social breakdown.
Some of South America is in a depression through high inflation.
In the U.S. we cannot keep living like we have twice the income that we really have. Our national debt doubled while Obama was in office and has doubled again under Trump and Biden. Just trying to throw more money at the problems like our government has been doing will just make matters worse in the long run because this nation cannot afford to take on more debt. Passing the costs to some future generation is simply not possible. No future generation can possibly pay our huge rapidly increasing debt and soon nobody will be stupid enough to continue to finance our increasingly risky debt at the abnormally low interest rates that came about through the criminal actions of the Federal Reserve.
There is no easy answer to the world debt problem because many people and nations have been living beyond their means for many decades. They have been amassing debt and entitlements that cannot be sustained. With the aging populations and falling birth rates there is no next generation being raised to pay these passed on bills. The credit line of many nations are maxed out and the young cannot support the entitlements that the old were promised.
If the spending beyond our means for decades has not been enough, many people are still gambling with your investments. They take your money and use it as security to leverage investments worth thirty to a hundred times that amount. In 2008 some bubbles burst and many that were gambling lost. Some financial institutions got bailed out and most did not learn their lesson. It is even worse today then it was in 2008. The world banksters are still gambling with savers money.Some big corporations and financial institutions could not pay their debts because of the severe downturn in 2008. So they either went bankrupt or were declared too-big-to-fail by our government. The government bailed these out and passed down the bills to the next generation.
Since 2008 few banks will lend on commercial ventures anymore, instead they are either still gambling on markets or they are sitting on their money. Nobody wants to lend for economic development because they are afraid that they will never get paid back.
One reason for the lack of quality jobs is that the government cannot institute a policy to buy American or they risk a trade war with other nations in the global economy that are also living beyond their means. The trade war probably is coming anyway because unemployed people of nations will demand that their government do something to protect their jobs. All government can do to keep jobs at home is to allow protectionism.
That happened in the 1930's and it made a bad recession into a long world depression. That now seems to be our future and along with the deflation depression or hyperinflationary depression that is bound to come, it will allow for the rise of populist saviors who will convince people that they know who is to blame and that they have all the answers. In other words, we are now repeating the same mistakes of the 30's that led to the nationalist socialistic movements and the start of World War II. It will not be different this time except the stakes for the world will be much higher.
The same mistakes in housing in the US are being made all over again. I do not think this is a good time to invest in residential real estate unless you plan to actually live in the house for a long time. The recent climb in values will probably be short lived as this country goes into the next phase of the economic problem. The percent of Americans owning their own home has been falling since the 1990's. Family income in the United States has not increased for decades. The recovery is mostly in the stock market. What recovery there is seems to be the result of the Federal Reserve creating more money and through government borrowing. The recovery is going to speculators in the top one percent. The rich are getting richer and the workers are getting poorer.
If I have a sure message to people who are listening, it is this - Learn to live on an income that is less than half of what you were living on in your good times. Try to network with mature astute conservative Christians who understand these issues. It is going to be a tough time for everyone and those who stand alone will have little support. More spending beyond our means is not going to solve a problem that was caused by spending beyond our means. It will only make things worse in the future. The coming decade for the U.S. and the hard choices it makes will determine if we even survive as a nation.
Original article on the coming economic crash caused by world
(Some figures and a few others things have been change through the years)
Almost every nation of the world has such severe debt that just making the interest payments takes a large amount of their financial resources. Much of this world debt is owed to world bankers that then dictate their own economic policy to these countries. These policies do not favor the poor.
The largest economy in the world is the United States. The US government is currently over 25 trillion dollars in debt and I project that to go over 40 trillion by the mid 2020's. Paying the interest on that huge debt in future years will cost more than what is spent on national defense (using modern historical interest rates and the cost of defense under normal peace time conditions).
The United States is now by far the biggest debtor nation in the world. For many years we have been importing hundreds of billions more dollars in goods and services than we are exporting each year. In 2005 through 2008 the trade imbalance averaged well over 700 billion dollars per year! Trillions of US dollars are now in the hands of foreign investors who at any time could dump the dollar causing a devaluation of the currency.
During the presidency of Bill Clinton the US government was forecasting surpluses of trillions of dollars based on the stupid assumption that there would not be a downturn in the economy for decades. This foolish assumption was of course proven wrong. The only reason the United States is not yet feeling the pinch of spending beyond its means has been the record low interest rates. The low interest rates were brought about by Federal Reserve manipulation to stimulate the economy but interest rates eventually will have to rise. Soon all who need loans will be making higher payments and the US government will be paying much more to service the national debt.
Debt and unfunded liabilities promised through entitlement programs is now approaching 200 trillion dollars. This amount of money in non inflationary dollars is impossible to raise! Thus, the US is now technically bankrupt. In order to keep up the facade that the US is solvent for even another decade or two, one or more of the following must happen.
1. Taxes must be drastically raised.
2. Government spending will have to be drastically cut.
3. Deficit spending will dramatically increase.
If taxes are raised, it will kill the economy and the debt load will get worse and not better. Spending will not be drastically cut because these types of cuts would never get through the political system. Therefore, massive deficit spending will take place. The monetary system will be inflated so that this debt can be paid by using a dollar worth only a fraction of what it is today. This means a much weaker dollar in the future and much higher prices for all goods and services imported to the United States (in short, a weaker dollar, brings inflation).
The best long term scenario is that the economy will expand for decades and we will partly grow our way out of this debt crunch (like we temporarily did under Ronald Reagan). But, I do not see stability for that length of time as even a remote possibility in this world full of crises. I think it is only a matter of time before another downturn in the economy or an unforeseen world event brings about the collapse of this house of cards.
The catalyst for a crash can come in any number of ways. One likely scenario is that confidence in the US dollar will falter. When this happens interest rates will have to rise dramatically to try to lure foreign investors to re-service our debt. Higher interest rates will then shut down our economy and less tax money will be raised. The debt will still have to be paid at the higher interest rate so the government will print even more money and deficit spending will increase. The dollar will fall in value against other currencies bringing about an inflation spiral in the United States and even more dumping of US dollars for more stable currencies.
Banks and institutions holding today's unrealistic low interest loans on property will go under, causing a collapse of pension systems and/or a taxpayer bailout that will worsen the deficits even further. Many with mortgages will not be able to make the payments and they will default on their loans. The foreclosed houses will be dumped on the market bringing a collapse in all home values.
The fall of the US economy will have a domino effect and bring about a worldwide depression that will further depress the US economy and bring a full fledged inflationary depression worse than the great depression of the 1930's. When this happens most companies will go bankrupt and many will be nationalized.
*(When I first wrote about the coming economic crash caused by debt in the year 2000, I said the stock market was three times higher than it should be. Since then the market fell about 50 percent but rose higher than ever again. The next crash will soon be on its way. I think a 50 percent crash is almost a certainty but it probably will go much lower. Instead of banks failing like I said, next time, expect buy-ins where the banks rob investors to pay for the banks losses. The precedence was set in Cyprus in 2013. Buy-in's have recently been legislated in some nations. If you have not noticed, during crisis governments do whatever they want anyway).Paper money is only worth what it can be traded for in real goods and services. The United States record deficit spending is putting cash into the economy but like all who spend beyond their means the bill will come due. Soon investors will lose confidence in paper money and others that hate the US will deliberately cause more pain and the dollar will fall like a rock. The Federal Reserve Bank has been creating money for years to buy our own debt and to keep interest rates artificially low. This could have dire consequences in the future.
Inflationary depression worse than the great depression
Two thirds of the families in the US are now invested in the stock market compared to three percent in the great crash of 1929. When the economic crash comes, retirement accounts, mutual funds and most paper wealth will be wiped out. Most people making a living on the service sector of our economy will be unemployed. Prices on everything made in this country will either deflate or paper money will lose most of its value. The resultant depression will affect everyone and it will be the worst that this nation has ever known.
When the US economy goes down it will take the world economy with it. This economic collapse will cause great civil unrest all over the world, cities will be filled with riots and later with troops. Democracy will be dead and people will look to demigods to solve their problems. When the economy of the West crashes Russia may get ideas to invade the Middle East to seize its riches.
This day will not take some of the elite of the world by surprise. They know that this day is coming (Satan pulls their strings). At the appropriate time, the solution to the crises will be to abolish almost all debt and most of people's savings and to start over with a new world economic system that will set the stage for the end time economic system described in the book of Revelation.
There is little question that the world debt crash is coming. It does not even have to start in the United States (it could begin in Japan, China, Europe or elsewhere). The only question is the timing of this crash. The world debt situation is so bad now, that a deliberate or accidental crash could occur at any time. The world bankers and world leaders have been putting off the inevitable by huge bailouts and debt extensions. However, with these bailouts there is loss of sovereignty to world government and world bankers. They will continue in this mode until the house of cards collapses of its own weight, someone pulls out a card, or some large scale economic disruption blows this house of cards over.Students of Bible prophecy know that a new world economic system will be set up under a world government where no one will be able to buy or sell unless they take the "mark of the Beast". The formerly debt ridden world will embrace this worldwide cash-less monetary system after the crash because this new system will wipe out most debt and all nations will start afresh. This new economic system will promise great prosperity to the world.
Signs of the time
There is unparalleled greed and foolishness happening in the financial markets of today. People have lost their ability to reason. Like gamblers at casinos the day traders believe that they cannot lose. They think the stock market will always go up. When they take a loss they just double up on their bets. At the high roller's table there are the derivative speculators that are gambling trillions and whole corporations on the wheel of fortune.
We allow government to spend more than it collects and thus defer the bills to our children with little thought to the consequences it will have for them. The scripture says that the love of money is the root of all kinds of evil. Even many Christians have embraced these evils. The number one message preached today in Christian media and in pulpits is "give us money". God has blessed the United States because of His people living here, but greed will ultimately bring correction.
The massive world debt load argues that borrowers have become enslaved by the lenders and will do their wishes. On a temporal national level this means that debt ridden nations must fall in line with the agenda of the globalist socialist elite or they will find themselves in a depression. In the longer term, when Satan is ready for his man to take control of the world, this generation will see a total crash of the economic system. The new economic system solution will eventually bring the 666 mark of the Beast and total enslavement of all people in it.
Derivatives: Global roulette wheel, by Arnaud de Borchgrave
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