We are living through one of those great shifts in history that you read about as a kid. I find it fascinating. U.S. bonds are spiking amidst volatility in Europe, and this is what must happen before U.S. bonds crash. I’ve always said Europe will collapse first, then the U.S. We are still the deepest financial market in the world, and this gives us time to prepare.
Everything is connected. If there is a government debt problem throughout the Western world and Japan while the population is aging, this poses a huge problem. If government bonds, which retirees are heavily invested in, are topping after a 30-year bull run, isn’t this a massive crisis in the making? It is always bond market collapses that just wipe everyone out. It is the debt market, not the stock market, that keeps the global economy humming along.
Make no mistake about it- Europe is blowing up. America will probably be the last country to blow up, but it’s coming. Think about it this way: even with balanced budgets- which would raise the unemployment rate to double digits- our debt would continue to rise at an ever-accelerating pace because of interest. As Einstein said, compound interest is the 8th wonder of the world.
Political uncertainty in Europe is rising, and this reminds me a lot of the world pre- WW II. It is when the economy is the weakest that rabblerousers can win the hearts of people. This is the risk we face. Government stupidity has consequences.
People fail to grasp the big picture because it is complex, and they are pointing fingers at the wrong people. This isn’t about rich vs poor, it’s about government fiscal mismanagement. Raise taxes while promoting austerity and I guarantee a Depression in America. Let’s not be so stupid. There is a way to save the global economy, but I doubt our leaders will figure it out. As you all know by now, you should be buying gold on dips because this is going to get ugly.