Record Global Debt May Mean a Horrendous Financial Crisis

As mentioned before in these pages, every major deflationary episode in the past has been preceded by a buildup of excessive debt.

This ties in with a Jan. 17 headline (CNN):

The world has a major debt problem. Is a reset coming?

As of June 2022, the amount that governments, households and corporations owe is $300 trillion. When that staggering figure is divided by the world’s population, it equals $37,500 in debt for every person.

Yet this super huge amount of debt is just one of the factors which portends a historic financial crisis.

This quote is from a 2022 Elliott Wave Theorist:

Pervasive Top Conditions

A stock market peak of Grand Supercycle degree hasn’t occurred for 302 years. Completed wave patterns, throw-overs of multi-year channels, euphoria among investors, confidence among consumers and economists, an expanding economy, low unemployment figures, record debt and a record-low quality of debt all indicate a historic positive extreme in social mood, greater than those of 1720, 1835, 1929, 1937, 1966-1968, 1999-2000 and 2007. The stock market is spectacularly overvalued. Stock ownership is the broadest in the history of humanity, both in the U.S. and abroad. Research is derided, while passive investing is lauded as the road to riches: Just buy funds comprising indexes and ignore the relative health of component companies. A hundred years ago there were only two stock indexes, one for every 1000 stocks. Now there are 70,000 indexes for every 1000 stocks. In 2009, there was one cryptocoin. Now there are thousands of them, mostly just clones of the original. Finance has intoxicated the public. The number of types of vehicles with which to speculate is unprecedented. The number of derivatives is unprecedented, and the aggregate value of those derivatives is unprecedented. The complexity of the investment marketplace is unprecedented. The number of investment manias in the past quarter century is unprecedented. Credit spreads are the lowest in history, and in some cases negative. European junk bonds recently had lower yields than U.S. Treasuries. Similar conditions have appeared in a few rare instances in history and — although past episodes have been far smaller in scope than at present — they have always led to a substantial crisis in the financial system. [emphasis added]