Global Debt Binge Setting Us Up For A Pounding Economic Headache

Anyone doubting that there is a material risk that that the next global economic recession will be of the more severe than normal variety has not been paying attention to the massive build-up in global debt levels over the past decade. Nor have they been paying attention to the unusually low interest rates at which all too much of this debt has been issued.
All of this has to be particularly troubling considering that much of this debt has been issued at very low interest rates that do not nearly compensate the lenders for the default risk that they have been running.

Sadly, there is little that the world's central banks can do to dial back the global credit bubble that they have created by their many years of ultra-easy monetary policy and massive balance sheet expansion. However, one can hope that they are not unaware about the serious financial market risks that they have created and that they are not again caught flat-footed - as they were in 2008 - should those risks indeed materialize. If not, we should brace ourselves for another very rough ride in the global economy.

https://seekingalpha.com/article/4184152-global-debt-binge-setting-us-pounding-e...
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Global Economy On Precipice Of Secular Decline: Detailed Via Shifting Population, Demographics, Income, And Consumption

Many look at global population growth as a given to greater consumption... and looking at the chart below of total global population set to hit 7.8 billion by 2020, one might be forgiven for this viewpoint. However, the reality, when one looks into the numbers, is that growth in global consumption has ended.
This article explains why this population growth will no longer equate to economic or consumptive growth.

0 to 64 year old Global Population
The 0 to 64 year old global population is about 7 billion persons, as of 2018.
All 0-64 year old population growth from now forward will be among the lower middle and low income nations of the world.

Income by Age of Head of Household
Why the focus on 0 to 64 year old populations? Average income and expenditures vary greatly by the age of the head of household. As one might expect, income and expenditures start low, rise through peak earnings years (45 to 54 years old), and then recede in later life (earnings more than halved and expenditures roughly halved by the time the head of household is 75 years old). So when I show that all population growth is among the 65+ year old population in the high income nations and will soon be the same among the upper middle income nations... this really matters.

Gross National Income Groupings
The high income nations represent 64% of global income and the upper middle income nations another 27% while the lower middle and low income nations represent less than 9%, combined.
Since all the global 0 to 64 year old population growth is among the lower middle and low income nations of the world, a closer look at their situation is merited. In short, it ain't good. After rocketing higher from 2002 until 2014, the situation is really deteriorating as the growth of the high and upper middle breaks down... without the growing wealthier markets to export to or in need of greater capacity in low cost countries, the engine is stalling in the poorer nations of the world.

Total Energy Consumption, by Group
Thanks to the EIA, we can see the total primary energy consumption by each income group (including coal, oil, natural gas, renewables, etc.). The peak and secular decline underway among the high income nations very much mirrors the changing under 65 year old population. Likewise, the upper middle income nations energy consumption has stalled, just as one might expect, based on the like stall in their under 65yr/old population. The secular downturn in energy consumption among the upper middle income nations is imminent. These slowdowns are sending shivers across the lower middle and low income nations of the world, that absent the wealthier nations growth, are likewise stalling.



65-74 year old and 75+ year old Populations
By 2035, the 65-74 year old population essentially peaks and begins to decline leaving all population growth solely among the 75+ year olds... the segment with the lowest earnings and spending habits (not to mention taking large withdrawals from unfunded liabilities alongside massively underfunded pensions).

Putting it all together. I take the historic and current income per capita of each grouping and multiply by 110% among the 0 to 64 year old population, multiply by 70% among the 65-74 year olds, and by 50% among the 75+ year olds. Historically, the chart matches almost 1:1. However, looking forward, the outcome is that the shrinking numbers of 0 to 64 year olds in the high and upper middle income nations essentially offset the rising numbers in 65+ year olds and broad rising numbers among the lower middle and low income nations. In a world premised on perpetual growth, the best case scenario is essentially a stalemate.

Growth has ended and decline will be the central feature for decades, if not centuries. How we decide to handle this new reality will not only determine the financial and economic systems, but likely the fate of civilization and mankind. The issue the world will not face will be resource depletion (at least not in the short run), instead the world is faced with how to deal with the growing inequality among (and within) nations, resultant overcapacity, ongoing urbanization versus large scale rural depopulation, and a general bankruptcy/reorganization of all the promises made that required perpetual growth to make them come true. 

https://seekingalpha.com/article/4202084-global-economy-precipice-secular-declin...
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As previously stated, there are a few Major Influencing factors at play -
1) Demographics
2) Energy
3) Climate Change

All of which, combines to Affect/Effect our Local, State, National & Global Economy!!!

perceptions_now wrote on Sep 1^st, 2018 at 11:15am:


There again, WE MAY NOT GET THE/ANY TRUTH!?

My buy point for BHP lately has been $32 and it's down to close that today with a low of $32.10, but I think I'll hold off until tomorrow as it's had steady decline all day. I prefer to buy when it opens low and stays with a smaller range.

Gordon wrote on Sep 6^th, 2018 at 2:07pm:


Good luck with that, you may well need SOME LUCK!

Don't worry - I was laughed at to bits at school because I said Sri Lanka would be World Champs soon.
My theory was based on watching the 'minnows' playing at the Hong Kong Super 8's (the very short game that suits the batter, more than bowler - unlike Test) for years.

Sure enough, within 4 years - they were 'World Champs' in One Dayers, because they brought in 'Attacking' Batting (via Super 8's) and a 'New Age' was born.

I think you might be right with your Economic forecast.
Although I always said a 'Great Depression' - but with Bush & Obama in, I could believe it: Bush 'blew' the money away on War and Obama couldn't earn a dime (too busy being 'popular').
But with Trump in - 'business' seems 'confident', in charge and hopeful.

...but what if Trump doesn't get a 2nd time, even worse - is 'Fired'? The Media hates him like no other President and seem obsessed with destroying him at any cost (even to themselves  ). Would that 'Golden Age' suddenly fall away like sand between fingers?

I think 'when' Trump goes and possibly after just one term,
things will deteriorate considerably for the USA and don't expect the 'Media' to be able to fix it. 
I think USA will slump so bad, it would be like its disappeared from the face of the world...

...and then the likes of North Korea, China, Islam and more will see their chance! 

Martin Feldstein On A Financial Crisis To Rival The Great Depression

Summary
Martin Feldstein the Harvard economist has recently expressed concerns that the economy could experience a $10 trillion collapse in US household assets resulting from a "spike" in interest rates.

The yield on the 10-year Treasury note has just passed the 3.00 percent mark and may be heading toward a "spike" that might set the whole economic collapse into motion.

Such a "spike" may result from the monies "risk averse" international investors have been placing in the "safe haven" US, leaving America because of growing fears of a trade war.

Martin Feldstein, Harvard economics professor, former Chairman of the President’s Council of Economic Advisors, and president emeritus of the US National Bureau of Economic Research, has put it very bluntly:

“The next US bear market is likely to be caused by a spike in 10-year Treasury yields….”

To return to Mr. Feldstein’s remarks, we left him saying that “The next US bear market is likely to be caused by a spike in 10-year Treasury yields… and would risk setting off a $10 trillion crash in US household assets.”
Mr. Feldstein said he thinks “the effects of a bear market could spread into the retail economy, draining it of $300 billion to $400 billion a year, and risk an economic crash to rival the Long Depression of the 1870s and the Great Depression of the 1930s.”

And, this is not the end of it.

“Fiscal deficits are heading for $1 trillion, and the debt ratio is already twice as high as a decade ago, so there is little room for fiscal expansion.”

So, to top it all… ”We have no ability to turn the economy around.”

https://seekingalpha.com/article/4207176-martin-feldstein-financial-crisis-rival...
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Well, the basic issues that gave Economic Growth, for much of the Modern Economic era were -
1) Demographics - Unrelenting Growth, provided a Backstop, which ensured Economic Growth!
2) Energy - Mostly Cheap & Available
3) A Goldilocks Climate
All of which is combining to Affect/Effect the Local, State, National & Global Economy.
However, Each of the above are now in the process of changing & regrettably that change is Negative & has been for some time!
There are SOME who have/will try to overcome the Basics, with Debt/Lower Taxes & other measures, which will inevitably lead to an even worse set of outcomes!

perceptions_now wrote on Dec 3^rd, 2010 at 10:30am:


2012? Did I miss something?