Total global debt is now a record $199 trillion, an increase of $57 trillion since the Great Recession, raising concerns a deep depression is coming.
Government, corporate and household debt have exploded at least 47 countries and “all major economies today have higher levels of borrowing relative to GDP than they did in 2007,” according to a report by McKinsey & Company.
“After the 2008 financial crisis and the longest and deepest global recession since World War II, it was widely expected that the world’s economies would deleverage. It has not happened,” the report stated. “Instead, debt continues to grow in nearly all countries, in both absolute terms and relative to GDP.”
The report house that 80% of all countries have higher household debt, government debt is up $25 trillion since the Great Recession and China’s debt has quadrupled in the past eight years.
“Unsustainable levels of household debt in the United States and a handful of other advanced economies were at the core of the 2008 financial crisis,” the report added. “Between 2000 and 2007, the ratio of household debt relative to income rose by one-third or more in the United States, the United Kingdom, Spain, Ireland, and Portugal. This was accompanied by, and contributed to, rising housing prices.”
“When housing prices started to decline and the financial crisis occurred, the struggle to keep up with this debt led to a sharp contraction in consumption and a deep recession.”
And that’s not to mention the impending derivatives crisis.
A derivative is a legal bet on the future value or performance of an entity, such as an asset, index or an interest rate, so in other words, a derivative, unlike stocks and bonds, isn’t an investment in anything that actually exists.
To put it into perspective, imagine derivatives as bets on a horse race and Wall Street as a giant casino where all these bets are taking place.
And to really drive home the danger, here is a list of the top five banks in the U.S., comparing their total assets versus the exposure each bank holds in derivatives (Third Quarter 2014, Office of the Comptroller of the Currency):
Total Assets: $1,377,620,000,000 ($1.4 trillion)
Exposure to Derivatives: $70,254,978,000,000 ($70.3 trillion)
JP Morgan Chase
Total Assets: $2,008,808,000,000 ($2 trillion)
Exposure to Derivatives: $65,307,835,000,000 ($65.3 trillion)
Total Assets: $111,758,000,000 ($111.8 billion)
Exposure to Derivatives: $48,694,949,000,000 ($48.7 trillion)
Bank of America
Total Assets: $1,524,575,000,000 ($1.5 trillion)
Exposure to Derivatives: $37,505,160,000,000 ($37.5 trillion)
Total Assets: $1,482,815,000,000 ($1.5 trillion)
Exposure to Derivatives: $5,145,161,000,000 ($5.1 trillion)
Eventually, with this excessive amount of risk versus assets, these big banks will crash the market and the ensuring derivatives panic will completely destroy what’s left of the world economy.
“We are in worse shape economically than just before the ’08 financial crisis,” Peter Schiff, the investment broker who accurately predicted the 2008 collapse, said on the Alex Jones Show. “We’re in worse than we were in at the peak of the NASDAQ bubble in 2000.”
“We’re in worse than we were going into the great depression in the 1930s.”