The current financial system is on borrowed time.
This is not fear mongering. It is fact.
The system almost went down in 2008. Since that time, every major decision made has been to double down on the very same bad ideas that created 2008.
Those bad ideas:
1) Excess debt driven by loose money policy.
2) Moral hazard (not allowing those who make terrible choices in the banking industry to fail).
3) Increased Centralization of the economy.
The first two are a product of the third. You can only get into a place where one terrible decision is made after another when you have only a handful of people making decisions in a consequence free environment.
The drive for Centralization has been ongoing for 70+ years. Today, 4-5 players dominate every industry in the US. Media, drugs, energy, banking, you name it, there are 4-5 companies that control 90% of the market.
The flip side of this is that self-employment is at an all-time low relative to total employment. This hollows out the economy, eviscerates the Middle Class, drives incomes lower, and makes the US a less competitive, vibrant economy.
It also kills creativity and risk-taking as an increasing percentage of the US relies on big business for their incomes and so is afraid to speak out of turn or take risks (start new businesses). Consider the financial media where one wrong question of a Central Banker gets you fired. This benefits neither the reporter, nor the banker, nor the economy as it kills creativity/ competition/ quality of work and the like.
The drive for Centralization goes all the way up the corporate food chain. With innovation dulled by bloated corporate structures, executives increasingly rely on financial engineering to juice returns (it doesn’t help that such a large percentage of executive compensation is based on stock prices, but that’s a topic for another time).
As a result of this, companies are issuing debt to buyback shares, leveraging up their corporate balance sheets (again the Centralization/concentration of wealth theme) to increase earnings per share.
Today, US corporations are 30% more leveraged than they were in 2007 (the previous credit bubble). But they are not the only ones. Central Governments have been issuing debt at a record pace as they cajole an ever-increasing number of voters to buy into the status quo by dangling social services programs in front of them.
As a result of this, today the financial system has over $20 trillion MORE debt than it did in 2008. Put another way, whatever problems the system had in 2008, there are $20 trillion worth more of them today.
By logic alone, this tells us as that another 2008-type event is coming on a larger scale. 2008 was caused by derivatives based on consumer-focused assets (houses). The next crisis will be driven by derivatives on government-focused assets (bonds).
That will be the ultimate crisis. The crisis to which 2008 was the warm-up. The Crisis of Centralization breaking apart.
If you’ve yet to take action to prepare yourself and your portfolio for the next round of the Crisis, we just published a 21-page investment report titled Stock Market Crash Survival Guide.
In it, we outline precisely how the crash will unfold as well as which investments will perform best during a stock market crash.
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Best Regards
Graham Summers
Chief Market Strategist
Phoenix Capital Research