Global debt reset (loans, borrowing, mortgage, paychecks)

[roadrat]

Anyone think the world might be heading toward a global reset of debt, is it even possible?

https://www.fnarena.com/index.php/20...-global-reset/

Your thoughts

[TimAZ]

I guess a lot of this boils down to a simple question: What is the value of a bond when the issuer no longer has the cash flow necessary to fund its operations and make the interest payments?

[SWFL_Native]

IMO it's close... Likely the currencies will be devalued to fund the debt payments pushing inflation to us all.

[roadrat]

Originally Posted by SWFL_Native

IMO it's close... Likely the currencies will be devalued to fund the debt payments pushing inflation to us all.

If there was ever time for it I would think it's now, this has affected just about the entire world.
Europe is toast, China is trying to put on a good propaganda show but it's not gonna work, they are going to take a huge hit.
The US being a service economy is going to take a big hit if this goes to long.
My concern is what happens to 401k, and stocks in a reset.

[TimAZ]

Bonds are used as collateral in all kinds of contracts, swaps, and deals. When the collateral drops in value it can set off a chain of events in the financial systems that no one can predict. That is why the tendency is to hide or roll over these “minor” problems. For these people a debt “reset” is Armageddon.

[heart84]

A global deflationary bust is coming later this year into 2021. Debt will skyrocket exponentially through the roof. The Fed alone will be expanding their balance sheet into the $15-$20 trillion range. Helicopter money included lol.

[SWFL_Native]

Originally Posted by roadrat

If there was ever time for it I would think it's now, this has affected just about the entire world.
Europe is toast, China is trying to put on a good propaganda show but it's not gonna work, they are going to take a huge hit.
The US being a service economy is going to take a big hit if this goes to long.
My concern is what happens to 401k, and stocks in a reset.

https://www.awaragroup.com/blog/sign...ally-collapse/

Main findings:
-US debt-to-GDP to reach 140% by 2024
-Net increase in debt could be as enormous as $10 to 15 trillion in just five years 2019 to 2024
-Federal budget interest expenditure could reach $1.5 trillion by 2028, 25% of the total
-There has been no real GDP growth since at least 2007
-Growth of government debt has exceeded even nominal GDP growth multiple times each year since 2007
-US reporting on national debt and inflation full of tricks
-War budgets ripping open huge deficits
-Skyrocketing social spending leaves no room for deficit cuts
-Unfunded liabilities now a reality as Social Security and Medicare funds dry up

There has been no real GDP growth since 2007
We argue that there has been no real GDP growth since at least the 2007 – 2008 crisis – and most probably since 2000 when the tech bubble burst. The semblance of growth has merely been created by way of massive borrowings in all sectors of the economy: public and private, corporate and household. Starting with the deregulation and liberalization of the capital markets (and the speculation it entailed) in the late 70s and 80s debt growth accelerated above growth of the underlying economy and really shot off in the wake of the two financial market crises. (Table 1). An even earlier turning point be can be identified in 1971 when the U.S. abandoned the gold standard. Whereas, the size of the debt historically corresponded to the size of the underlying economy, the level of US total debt (public and private) is now 3 times higher than the GDP.

Their argument in "real GDP" growth being 0 since the early 2000's is that you should measure the nominal GDP growth and adjust for inflation "CPI" to get real GDP growth. The hypothesis is that 100% or more of the nominal GDP growth in the US has been funded through unsustainable debt. Thus once we can't cover the debt service charge or raise new debt we will have to deflate currency to cover it. Thus there is a significant amount of unrealized inflation built into our economy that we haven't felt yet. Once it pops we will feel the inflation cost of our behavior and likely our GDP will be realigned back to reality of the 00's levels.

[Roboteer]

Originally Posted by roadrat

Anyone think the world might be heading toward a global reset of debt, is it even possible?

If the fools try that, tomorrow morning you will find your savings and checking accounts empty, the grocer not accepting your checks, your auto finance company calling in their note, your home mortgage being repudiated, and your own paychecks bouncing because the company suddenly can't cover them. All those companies had their money in various banks, and what do you think those banks had it invested in?

All those loans the "reset of debt" idiots just made disappear, were YOUR money being loaned out. Bye-bye.

Just keep one thing in mind.

The fools proposing it, may be able to actually do it.

But once they do, they can never UNdo it.

That said, now go ahead and try it. The politicians pushing it promised you no harm would come of it, didn't they?

[Roboteer]

BTW, remember those trillion-dollar debts we have planned, to support all those government freebies? Forget them. The people we were borrowing all that money from every year, suddenly have no more to lend (by buying bonds).

And if any still have any money, the U.S. Government is suddenly the LAST outfit they would ever dream of lending to. Once bitten, twice shy. To say the least.

The gummint would be forced to balance its budget, right now, and for all time to come. Never spending more each year, than it takes in in taxes. Ironically, that might be the only "silver lining" there is to this hugely black cloud.

Yeah, a "debt reset" is a GREAT idea. What could go wrong?

[Roboteer]

Oh, and that $800 billion coronavirus "stimulus" that Mnuchin announced today? Those checks'll bounce too. They were all borrowed money, of which there suddenly isn't any, any more.