What really concerns me
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John
Jul 5, 2015, 4:52:53 PM7/5/15
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All,
I just wanted to be clear that, from a global perspective, what concerns has concerned me most for a very long time now is a collapse in the global debt markets.
Why? Because this is the biggest problem in the financial world right now. Generally speaking, the world is awash in unprecedented, extra-ordinary levels of debt. By most measures there is far more of it globally today that there was even before the GFC in 2008-9. But what is just as important to understand is that the monetary tricks (primarily dropping forcing some interest rates down) employed by central banks and governments to try and avoid the worst of the GFC are no longer available or are much less potent this time around. Sadly, those same tricks actually played a key role in the debt mountain growing since then - a classic case of unintended consequences making things worse.
These global debt markets needed to be written down/re-priced back in 2008. Central banks and governments, ratheriing these problems were not seen on their watch, cut that natural process short and delayed it, making the total eventual damage that would be realised in the future signficantly worse. This is classic emotional, short-sighted, emotion-driven, self-preserving human nature.
We are now in a situation where all it takes is a "trigger". The trigger itself does not need to be big. It could be "Greece-sized". It may not even need to be that big.
But that trigger, when it comes, will initiate a giant "call" to expose the actual market value of most of the debt sloshing around in the global financial system. This would also very likely trigger an enormous liquidity/solvency crises across large swathes of the financial world.
If you've been watching the global financial news over the past few years you'll recall that in various countries that have suffered minor/contained bank crises, the "depositor haircut" or "bail-in" process has been trialled. This is where the idea of what makes a "bank" and bank has been entirely turned on it's head. Under a "bail in", when the bank runs aground they simply legally steal their own customers deposits (or a portion of it) to stay afloat.
Whenever the trigger finally is pulled, you need to be aware of the growing trend of banks (and governments) to legalise the process of customer deposit theft.
Given that it is still the case (all these years since the GFC) that most important banks in the world are still on very shaky financial ground, this is a very real possibility.
That being the case, there will come a time when cash - physical cash in your hand/stored as safely as you can - may be the only safe option. Given that there is a truly gargantuan difference between the amount of global savings deposits and the pool of printed physical cash, you need to be aware that physical cash could become scarce extremely quickly.
These are not pleasant subjects, but they need to be dealt with and considered calmly and before a storm hits. Everyone needs to have a plan for this kind of eventuality.
Regards
John
I just wanted to be clear that, from a global perspective, what concerns has concerned me most for a very long time now is a collapse in the global debt markets.
Why? Because this is the biggest problem in the financial world right now. Generally speaking, the world is awash in unprecedented, extra-ordinary levels of debt. By most measures there is far more of it globally today that there was even before the GFC in 2008-9. But what is just as important to understand is that the monetary tricks (primarily dropping forcing some interest rates down) employed by central banks and governments to try and avoid the worst of the GFC are no longer available or are much less potent this time around. Sadly, those same tricks actually played a key role in the debt mountain growing since then - a classic case of unintended consequences making things worse.
These global debt markets needed to be written down/re-priced back in 2008. Central banks and governments, ratheriing these problems were not seen on their watch, cut that natural process short and delayed it, making the total eventual damage that would be realised in the future signficantly worse. This is classic emotional, short-sighted, emotion-driven, self-preserving human nature.
We are now in a situation where all it takes is a "trigger". The trigger itself does not need to be big. It could be "Greece-sized". It may not even need to be that big.
But that trigger, when it comes, will initiate a giant "call" to expose the actual market value of most of the debt sloshing around in the global financial system. This would also very likely trigger an enormous liquidity/solvency crises across large swathes of the financial world.
If you've been watching the global financial news over the past few years you'll recall that in various countries that have suffered minor/contained bank crises, the "depositor haircut" or "bail-in" process has been trialled. This is where the idea of what makes a "bank" and bank has been entirely turned on it's head. Under a "bail in", when the bank runs aground they simply legally steal their own customers deposits (or a portion of it) to stay afloat.
Whenever the trigger finally is pulled, you need to be aware of the growing trend of banks (and governments) to legalise the process of customer deposit theft.
Given that it is still the case (all these years since the GFC) that most important banks in the world are still on very shaky financial ground, this is a very real possibility.
That being the case, there will come a time when cash - physical cash in your hand/stored as safely as you can - may be the only safe option. Given that there is a truly gargantuan difference between the amount of global savings deposits and the pool of printed physical cash, you need to be aware that physical cash could become scarce extremely quickly.
These are not pleasant subjects, but they need to be dealt with and considered calmly and before a storm hits. Everyone needs to have a plan for this kind of eventuality.
Regards
John
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