When debt grows faster than GDP, the net debt as a percentage of GDP gets larger. If only GDP were growing faster, then maybe the debt wouldn’t be such a drag.
Central bankers and governments want instant gratification. Why? Because the system that keeps them in a job demands it.
There isn’t a central bank in the world that wants to go back to a gold standard. But that’s not the point. The point is whether they will have to.
So why do rising debt levels drive economies into crises? And why do we even have rising debt in the first place?
If the Fed does raise rates later this month, the US dollar will jump significantly higher. Stocks and gold will get crunched.
Governments and central banks may try to take private gold again. They hate gold because it gives individuals a way to protect against the devaluation of paper money — inflation.
Interestingly, if you’ve heard of the Rule of 72, you should know that it works with negative interest rates too.
One of the things that has annoyed central bankers is that when interest rates are so low, there is no incentive for savers to keep money in the bank.
One side says a US Federal Reserve increase will lead to market turmoil. The other side says if interest rates don’t go up, it will lead to market turmoil.
While the stock market could correct sharply lower in the short term, the next global financial crash will stem from government bonds.