Proverbs 22:7 The rich rules over the poor, and the borrower is the slave of the lender.
Spend, Spend, and Spend some more; we borrowed some and we can borrow more! Since the Great Financial Crisis, virtually every Nation, State, County, Province, Region, City, Town, Village, and two buildings near each other on the same road have gorged on Borrowed Money. The Central Banks of the World opened the Debt Spigot and flooded the Globe with Liquidity. It is oh so much fun when the spending is free. Everyone loves a “Big Spender”! Now the Credit Splurge is over and reality is setting in. Much of the Debt was squandered by bureaucrats that had no economic sense; spending on projects for local constituents that benefited political support groups to consolidate and retain power. Sometimes just outright Fraud and Graft. Some Debt was used to build Schools, Roads, and power Infrastructure, but too much was misspent and mal-invested by the totally incompetent but politically connected technocrats in the Corporate and Government worlds.
Larger than all the stock markets of the World, the Debt Implosion will cause massive Disruptions and Turmoil. Those that prepare will have enormous opportunities as assets are sold at discounted prices to satisfy loans.
Those middle managers that 10 years ago were still in School and have never experienced any Business Environment other than an expanding Credit Bubble will be bewildered as a Global Slowdown unfolds. No one told them that Loans will come due and need to be paid. No one told them Interest Rates can rise and rise quickly, No one told them that Debt cannot always be “Rolled Over’! No one told them Business Cycles end! No one told them, therefore, it is not their FAULT!
Politicians and Corporate insiders will not accept the blame as the Debt Time Bombs start to threaten. The Budgets that are trimmed and the Programs that are reduced or curtailed will become someone else’s fault particularly as Civil unrest starts, as local housing, medical, or food benefits are reduced or worse yet, eliminated! It will be someone else’s fault; either a Foreign enemy or a domestic Ethnic or Religious group will be blamed for mishandling the Economy. Border skirmishes or outright conflict may result as Governments look to deflect and distract. Enemies do not deserve to be repaid!
Goldman Sachs has been embroiled in Corruption across the World and has been accused of creating complicated Financing for Nations such as Malaysia and Greece that provided funds to desperate politicians at very expensive prices, good for the immediate term, but not so good when the Debt needs to be repaid. Abu Dhabi filed suit in New York November 21, 2018 accusing Goldman Sachs of Bribery and Money Laundering. Sovereign and Corporate Debt is at Risk of Default from Rising Interest Rates and Market Forces; now Sovereign and Corporate Debt is at Risk of Default due to alleged Fraudulent practices. Obviously, if the Money was Fraudulently lent, no one would expect to be paid back, would they?
The Bond Market will experience huge defaults and Global Deflation as Trillions of dollars come due; the Debt is not sustainable. Larger than all the stock markets of the World, the Debt Implosion will cause massive Disruptions and Turmoil. Those that prepare will have enormous opportunities as assets are sold at discounted prices to satisfy loans. Essential Cash Flow from Bonds can be replaced often by even larger Income Streams from conservative Rental Real Estate in the great growth markets of the US with much less Risk. A discussion with a Financial Adviser may be Timely and Prudent.