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The fuse on the global debt bomb has been lit. We are now officially in the crisis to which the 2008 meltdown was just the warm up. Here’s why.
The above edited excerpts (and the copy below) are from an article* by Graham Summers (phoenixcapitalmarketing.com) originally entitled Here’s How This New Crisis Will Play Out which can be accessed in its entirety HERE.
Every asset class in the world trades based on the pricing of bonds so the fact that bonds are in a bubble (arguably the biggest bubble in financial history), means that EVERY asset class is in a bubble – and what a bubble it is.
All told, globally, there are $100 trillion in bonds in existence today and when you consider that these bonds are pledged as collateral for other securities (usually over-the-counter derivatives) the full impact of the bond bubble explodes higher to $555 TRILLION. To put this into perspective, the Credit Default Swap (CDS) market that nearly took down the financial system in 2008 was only a tenth of this ($50-$60 trillion).
What does all this mean will happen eventually – THIS is what that all means!
- the bond bubble will implode
- the financial system will begin to deleverage as debt is defaulted on or restructured (reducing the amount of US Dollars in the system, pushing the US Dollar higher).
By the time it’s all over, I expect:
- Numerous emerging market countries to default.
- Most emerging market stocks to lose 50% of their value.
- The Euro to break below parity before the Eurozone breaks up.
- Some new version of the Euro to be introduced which will remain below parity with the US Dollar.
- Japan to have defaulted.
- Japan to very likely enter hyperinflation.
- US stocks to lose at least 50% of their value (and possibly fall as far as 400 on the S&P 500).
- Numerous “bail-ins” in which deposits are frozen and used to prop up insolvent banks.
The above process has already begun in Europe and will be spreading elsewhere in the months to come. Smart investors are preparing now BEFORE it hits so they are in a position to profit from it, instead of getting slaughtered. Interested in getting some assistance in doing so? If so, go HERE.
*http://gainspainscapital.com/
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