Global Debt Biggest Risk Factor for Global Collapse

by Lear Capital EditorialFebruary 24, 2015

Zerohedge points out that the biggest problem facing the world today is a massive debt-to-GDP ratio that is drowning the economies of most industrialized nations. In fact, 9 countries are in debt to the tune of over 300% of their GDP!

When we put that into household terms it might not seem too alarming. After all, it is common to buy a house and a mortgage that may be 3 times your annual income. The difference here is you typically pay DOWN your mortgage and then you own a substantial capital asset at the end.

Governments are not paying anything down. No principle payments are being made, and no real capital goods exist at the end of this tunnel. No, it is more akin to a credit card balance being the size of your mortgage and you are unable to make more than the minimum payment.

It is even worse than that. The credit card is not even maxxed out. Actually there is no limit. Every time we, in the US, bump up against our so-called debt limit, Congress hems and haws and eventually raises it.  This renders the “limit” on spending useless. If there is a “government shut down,” it is only a dog-and-pony show. Spending doesn’t really decrease, and furloughed employees always end up with back pay as part of the deal to raise the debt ceiling again.

There is no will in Congress to rein in government spending. Not even close. And government spending is THE reason sovereign debt is so out of control.

Increasing taxation to keep up with debt payments is tremendously politically unpopular, and with good reason. We are taxed enough already. Besides, we could be taxed at 100% and it wouldn’t cover it. We need for government to figure out how to live within its means.  We need them to stop spending money on wasteful programs and giveaways that are unsustainable just so they can buy off constituencies and maintain their political positions. We also need for them to figure out how to stop taking so much money from productive citizens. The amount we pay in taxes is already un-American.

Politicians know this. What do they do instead? They use their printing press, the Federal Reserve, to simply create the money they need to sustain these insane spending habits. The Fed enables whatever Congress determines it wants to spend. Creating new money is inflationary, by definition, and eventually we will see the repercussions in rising prices. We have already, whether they admit it or not. You know the truth. You see it all around you.

As bad as the debt is here in the US, it is important to note that we are by no means the worst offenders. 15 countries are in worse shape than we are! Governments all over the world are spending far beyond what their population is able to support. They can’t or won’t reduce spending. They can’t tax the people any more without incurring angry mobs with pitchforks coming after them. They do the sneakiest and most underhanded thing possible – they slowly destroy the currency and steal the people’s money by stealth.

This is another reason for the currency race to the bottom.

It all sets up a perfect storm for global economic and political collapse. When that kind of political and economic disruption occurs, it is impossible to predict which currency, if any, will protect you and your family. Gold and silver, however, remain a favored asset for tough times. Have you set your position?

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