This morning’s key headlines from GenerationalDynamics.com
- U.S. and the world approach the point of ‘peak debt’
- Saudi Arabia under pressure to reverse its U.N. Security Council decision
U.S. and the world approach the point of ‘peak debt’
U.S. Private and Public Debt as % of GDP since 1870
As I’ve written many times, Generational Dynamics predicts that theglobal financial crisis is far from over, and a global panic and stockmarket crash could happen at any time. As I’ve said, this isinevitable because of the exponential growth of public debt. Theabove graph is interesting, because it shows the ratio of private andpublic debt as a % of GDP going back as far as 1870. I’ve written inthe past about how this has been growing exponentially since 1950, butthis graph shows the secular nature of the growth a lot more clearlythan I’ve been able to do in the past.
The U.S. ratio is currently at about 350%, but there are othereconomies that are far worse off: the Eurozone is at 450%, the U.K. isat 550%, and Japan’s debt is close to 700% of GDP.
These figures show how precarious the world economy is, and how anyfactor that creates some kind of disequilibrium could result in aglobal financial crisis. Just to take one of many possible examples,interest rates might rise from their current artificially lownear-zero percent levels. This could affect hedge funds that areholding hundreds of trillions of dollars in interest rate swaps, whowould suddenly have to sell to cover their own debts, resulting in aworldwide chain reaction and spiral downward. Other possibilitiesinclude a war or a start of Federal Reserve tapering.
It’s worthwhile pointing out that there’s nothing that the U.S.government can do to cause this or to prevent this. Continue thesequester or end the sequester, reduce food stamp payments or increasethem, and so forth — it doesn’t even matter. “Eat, drink and bemerry, for tomorrow we die.” [Ecclesiastes 8:15, Isaiah 22:13]
The world economy is so fragile and out of kilter that this massivedeleveraging is baked into the cake, and the financial crisis willbegin when the right event triggers. It doesn’t matter too much whatanyone does in the meantime. Future Tense blog
Saudi Arabia under pressure to reverse its U.N. Security Council decision
After Saudi Arabia’s surprise announcement that it wouldreject a non-permanent seat on the United Nations Security Council,a group of Arab nations at the United Nations called an emergencymeeting and appealed to Saudi Arabia to reverse its decision.According to the Arab Group’s statement:
“We hope that they (Saudi Arabia), which are amongstthe blessed who represent the Arab and Islamic world at thisimportant and historical stage, specifically for the Middle Eastregion … maintain their membership in the Security Council.
[they should] continue their brave role in defending our issuesspecifically at the rostrum of the Security Council.”
Reports indicate that Saudi Arabia’s rejection was due to its anger atUnited States policy. King Abdullah was furious at the Obamaadministration for throwing Egypt’s leader Hosni Mubarak under the buswhen the Arab Revolution began in 2011. Recently, the Saudis aredisillusioned by the unwillingness of the U.S. and the U.N. to doanything about the genocidal slaughter, by Syria’s president Basharal-Assad, of hundreds of thousands of innocent civilians, even aftercrossing clearly stated “red lines” by using chemical weapons, afterpresident Obama’s flip-flop.
The latest concern is that president Obama appears to be close toanother flip-flop, by reaching some kind of détente with Iran thatwould lift sanctions and permit Iran to continue developing nuclearweapons.
The Saudis believe that they have played by all the rules, notpursuing any nuclear development of their own, and following all ofAmerica’s wishes for decades. Since president Obama has taken office,America has turned its back on Saudi Arabia in one policy afteranother. The rejection of the U.N. seat is a signal that the Saudisdon’t intend to play by the rules any more.