muses of the moment

April 23, 2011

Chris Martenson: next downturn drawing near

Another excellent analysis from Chris Martenson of the current problems that could bring the next leg down in this on-going global financial crisis. Click here.

When both big banks and sovereign entities are simultaneously facing twin walls of maturing debt, it is reasonable to ask exactly who will be doing all the buying of that debt?  Especially at the ridiculously low, and negative I might add, interest rates that the central banks have engineered in their quest to bail out the big banks.

This is the major problem. They may be able to print money for a time to cover this ongoing issue, but at some point, even the “last buyer of unsustainable debt” will run out of money creation capability or “investment capability” as per the Fed. We may even be at that point now, when the big banks and sovereign countries will just send the toxic assets back and forth from each others balance sheets depending on what the stats need to look like to get some idiot to give up their capital to buy the maturing toxic debt.

There are two entirely, completely, utterly different narratives at play here. One of them is that the economy is recovering, policies are working, and the vaunted consumer is either back in the game or close to it. The other is that the world is saturated with debt, there’s no realistic or practical model of growth that could promise its repayment, and the level of austerity required to balance the books is so far beyond the political will of the Western powers that it borders on fantasy to ponder that outcome.

If we believe the first story, we play the game and continue to store all of our wealth in fiat money. If we believe the second, we take our money out of the system and place it into ‘hard’ assets like gold and silver because the most likely event is a massive financial-currency-debt crisis.

Which narrative will you believe?

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