June 16, 2019 03:38 AM RSS

The Danger of a Devastating Deflationary Economic Wave is Growing

  • Wall Street Rebel | James DiGeorgia
  • 10/02/2018 2:24 PM
The Danger of a Devastating Deflationary Economic Wave is Growing

“We think the major economies are on the cusp of suffering a horrible recession… If the US economy starts to shrink, these levels of debt will likely become a very big issue.”

By James DiGeorgia

A growing number of analysts believe that both household debt and the rapidly growing national debt – which is now expected to increase by as much as $1.4 trillion a year on top of the existing $22+trillion – will more than likely lead to the next big economic downturn here in the United States.

Late this year, Goldman Sachs addressed the long-term danger of this rapidly worsening debt picture and warned that despite the optimism of President Trump, the growing debt in the public and private sectors presents economic risks that could cause a severe economic recession, perhaps a repeat of the 2008-’09 financial panic.

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Goldman Sachs rightfully referred to not only U.S. debt, but also the sheer size of global debt which is now over $247 trillion. If all we had to worry about were our national debt, it wouldn’t be a danger.  But the fact is global debt presents an even more dangerous threat to the U.S. economy because it’s so large that it could easily overcome the world’s sovereign funds resources. 

The Editor of Strategic Investment, James Dale Davidson is warning about the dangers of the growing size of both U.S. and world debt…

“We think the major economies are on the cusp of suffering a horrible recession… If the US economy starts to shrink, these levels of debt will likely become a very big issue.”

Peter Schiff, a well-known economic analyst, is also warning these high levels of debt risk an economic disaster saying

“We won’t be able to call it a recession; it’s going to be worse than the Great Depression. The US economy is in so much worse shape than it was a decade ago.”

Economic statistics speak of a similar situation. According to the figures:

·        US household debt of $13.3 trillion has overreached the 2008 value.

·        The value of student loans has shown a marked surge since 2008 to date. It has escalated from 611 billion dollars in 2008 to $1.5 trillion in 2018.

·        Auto loans have also manifested a similar hike. They have surpassed the 2008 value and have reached nearly $1.25 trillion

·        Meantime, the value of global debt has also risen from $177 trillion in 2008 to $247 today. This is close to 2.5 times the value of the global economy.

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Economists believe the invincible peak of debts is the major dilemma of the time. They also perceive the time when the wave of defaults by overwhelmed borrowers due to high interest rates will lead to a cutback in spending and income.

Another analyst, Murray Gunn, the head of technical analysis for HSBC predicts horrendous deflation in the next recession. He states:

“People will look to central banks to help them out, but the authorities will be found wanting.” Gunn warned,Our prediction is that central banks will go from being feted for ‘saving the world’ in 2008 to being vilified for being impotent in the coming deflationary crash.”

Schiff, who had been previously false in his predictions about the U.S. Federal Reserve, assures an affirmative analysis this time. Sticking to his idea, he banishes the latest positive indicators of the lowest unemployment rate in a generation, increasing business confidence, and accelerating Dow. Besides, he says

 Obviously, there is a whole lot of optimism — but there is a very good chance the U.S. economy is in recession within the next two years. This is already the second longest economic expansion in history.”

 

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