US Debt Explosion – LewRockwell

Can investors really be that wrong? Global risk is today greater than ever in history and at the same time the great majority of investors show no fear at all. There are so many potential catalysts that could shake the world economy out of its sweet dreams into a living nightmare that it is impossible to forecast where the trigger will come from. It could be a debt collapse in Japan, China, USA, Eurozone or emerging markets. Or it could be a currency collapse in any of those regions. Or it could be a stock market collapse, or it could be ……, or it could be……

Many stock markets around the world are at all-time highs. But there is no fear and no serious selling. Any slight decline is a buying opportunity. The S&P is up 4x since 2009 but that does not make investors nervous. That markets have been fuelled by dangerous and unsustainable credit expansion does not concern markets. Not even that global debt has doubled since 2006.

CHANGE STARTS IN THE PERIPHERY

But change starts in the periphery where very few are looking. Look at China where the Shanghai composite is down 23% since January. And look at Brazil where the Bovespa is off 17% so far this year and Turkey which has lost 20%.

What is important to understand is that most major markets are now looking extremely vulnerable, be it Japan, Germany or the US. Fundamentally most markets are overvalued with the help of central bank liquidity. Also, technically we are not far from crashes in most markets. Whilst there is always a possibility of a last hurrah, it looks like all markets have topped, including the US, and that later in 2018 we will see major falls. Once the bear markets start, they are likely to turn into secular trends that last many years and result in falls of 75%…

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