Debt is addictive. Once one gets on the stuff it is nearly impossible to get off of. And like all hard drugs, sooner or later debt will extract its toll. It certainly did in 2008. But instead of getting sober and real after that fateful year the world went on a binge instead. Not a very healthy thing to do. There will be pain, likely quite a lot of pain when the debt stops “working.”
When will reality come calling? It already has in many parts of the globe. But even the instability we see now is likely only a precursor of what is on the way.
As we’ve said before saying that a Keynesian bubble is going to pop is like saying the sun will rise. It doesn’t take a genius to understand this concept. Do we know when things will pop in a big way? Nope. All we can do is be prepared and not be surprised when the inevitable (in my estimation anyway) happens.
The world economy is still built on debt.
That’s the warning today from McKinsey & Co.’s research division which estimates that since 2007, the IOUs of governments, companies, households and financial firms in 47 countries has grown by $57 trillion to $199 trillion, a rise equivalent to 17 percentage points of gross domestic product.