Coming Credit Panic Post Pandemic
Alien-like, Rising Interest Rates will burst from our bellies
The virus has quickly and severely shut down economic activity across the globe. Many will not be able to make debt payments in the coming months. It doesn’t matter if central banks cut interest rates. As the year drags on, people and businesses won’t be able to find willing lenders.
How do I see this coming? How doesn’t everyone see it coming? We’re not seeing the signs yet because debt payments are made monthly. The first missed payments around the world happened are happening today. In three months, when the defaults begin, interest rates will rise, separating the strong from the weak.
Airlines, hotels, the oil business, anything manufactured using global supply chains — none saw this coming, few were prepared. Barely two weeks in, most didn’t have the money to keep paying their employees. What does that say for the future?
Trickle down is no longer working. Governments, which always work for their wealthy citizens, chronically underestimate the growing financial hardship and hatred around them. The toilet is about to explode.
The same imbalances created the conditions for the first two World Wars, if not most wars throughout history.
Why is much of the world’s debt paying effectively zero, or even negative, interest? I believe these rates are natural in a zero-growth economy.
A zero-growth economy doesn’t mean a dead economy; quite the contrary, it can be a busy economy as the photo above illustrates. In any city, among neighborhoods of high wage earners and wealthy property owners, all is good. Construction is everywhere. The restaurants are full.
People can borrow as much as they want and pay 3% interest. In the past 5 years their assets have doubled in value.
Indeed, every time I go out, in between edits of this story, I am confronted with the all-is-well vibe of my bubble city, Boston.
But, as I point out, time and time again. The rest of the world is burning.
The people who pay 25% interest, or can’t borrow at any rate, or can’t get Dollars and must watch whatever wealth they have disintegrate as their local currency inflates.
Everywhere else in the world, I see masses of immigrants, refugees, what have you, continuing to fester and grow. This week Turkey has allowed those from the Middle East to pass through into Europe. Recently, Turkey has entered the Syrian war in a real way with massive drone strikes.
If the economy has been doing so well, these past 10 years, then why are there so many large street protests around the world? They will be back, with a vengeance.
This economic slow down will lead to bankruptcies which will lead to a credit panic. A large wave of people over the age of 50 will lose their jobs, even in the U.S. What comes after that?