For years now, many of the world’s central banks, governments, investment banks, and corporations have survived only because of quantitative easing (QE, aka money printing), zero-interest-rate policies (ZIRP), and various other misguided strategies. Many of those major enterprises and institutions are essentially zombies, which have been kept solvent by nothing more than debt and free money. But the end is near, and things are about to get ugly.
Another Bubble, Another Bust (Surprise, Surprise)
This has happened before, and it will happen again – soon. It simply has to. The 2008 credit implosion left a gaping wound, and the only thing that the powers-that-be could manage to do was apply a superficial band-aid to the corpse-to-be. Instead of allowing all insolvent institutions to fail – and thereby purging the rotten system – they simply printed money, handed out free money, and blew up a massive credit bubble.
The beneficiaries of that largesse turned around and blew unsustainable bubbles in real estate, stocks, bonds, and more. Failing (pun intended) to learn from the previous crash (i.e., the crash of the subprime housing bubble in the mid-naughties), some of them went so far as to create a subprime auto-loan bubble. Not too clever.
To make matters worse, they did not blow a typical subprime bubble, but instead inflated what has been called a deep subprime bubble. Any fool can see where that is going. Fortunately, anybody with any sense can also see what’s happening, learn a bit more, and prepare for the easily predictable future.
Soon, My Friends, Soon
It’s not a question of if. It’s a question of when the shit will hit the fan. It’s well overdue, and the fan is spinning patiently. A standard feature of any unstable economy is the boom–bust cycle. In that sense, history repeats itself. Good times create optimism (false optimism, maybe). Such unrestrained optimism inevitably leads to unwise decisions and risky behavior. Eventually, the risk becomes too great, the optimism disappears, reality takes hold, and everything goes bust. People start running for the exits, but for most, it’s too late. Much too late. On the other hand, with regards to preparing for the inevitable, it’s never too early.
(Further Reading) The Next Crisis Could Be Worse than 2008 – https://www.lombardiletter.com/economic-crash-2017-and-how-the-next-financial-crisis-could-be-worse-than-2008/6973/
