It may feel like we’ll escape a debt crisis since, well, the world hasn’t ended in spite of runaway debt levels. Some of us hard money people feel like we’re taking crazy pills; how the heck can debt be so out of control, so completely unpayable, and yet the financial system keeps chugging along as if nothing’s wrong?
Well, history has a message for us: the current calm won’t last forever, because there is a direct link between government debt levels and the number of financial crises that occur. And since global debt levels are high – the second highest level in the past 150 years – it’s not exactly a stretch to conclude that another financial crisis is coming.
Analysts at Deutsche Bank recently released an extensive study that demonstrates the link between debt and crisis. One chart in particular screamed for attention.
They measured G-7 government debt levels, as a percent of GDP, and charted that figure against the number of crisis those countries have experienced. Here are the primary events they classified as a crisis or shock:
15% fall in stocks 10% decline in the country’s currency exchange rate 10% fall in bonds
This post was published at GoldSeek on Wednesday, 18 October 2017.