Posted on August 26, 2015 by Martin Armstrong
Ironically, he is correct in a limited sense. There is not enough Federal U.S. debt to satisfy the world. But that does not translate into debt being good. The shortage in U.S. debt has materialized from two primary causes: (1) the Fed buying in debt, and (2) the lack of trust in debt of other countries, no less at the State and municipal levels. So it is not that debt is good or that the answer is to create more debt. What is going on is a shift in debt portfolios due to risk that has been concentrating capital in U.S. Federal debt. In that sense, correct, there is not enough Federal debt to replace all other levels of debt outstanding. It is kind of like stock, for example if some company invents a new drug everyone will jump on that one share and may sell other shares to buy the hot one.
There is no question about it — we are in a debt bubble. But this is part of the crisis. Government debt has been perceived as “safe” so it has sucked in capital from the private sector. This has reduced investment that creates jobs and we see this trend fueling the rise in unemployment among the youth because governments are competing for capital that should be expanding the economy. This is all part of the crisis we face; we are one trend behind this shift on the horizon from public back to private.
The last Sovereign Debt Crisis at the national government level was in 1931. Hello world! It’s time again very soon. The implosion in equities is helping to create that bond bubble. Welcome to the final collapse of Marxism.
This entry was posted in America's Current Economy, The Global Market and tagged Debt Bubble, Good Debt, Paul Krugman, Sovereign Debt Crisis by Martin Armstrong. Bookmark the permalink.