History Says Global Debt Levels Will Lead to Another Crisis

Wednesday, October 18, 2017
By Paul Martin

By Jeff Clark
GoldSeek.com
Wednesday, 18 October 2017

It may feel like we’ll escape a debt crisis since, well, the world hasn’t ended in spite of runaway debt levels. Some of us hard money people feel like we’re taking crazy pills; how the heck can debt be so out of control, so completely unpayable, and yet the financial system keeps chugging along as if nothing’s wrong?

Well, history has a message for us: the current calm won’t last forever, because there is a direct link between government debt levels and the number of financial crises that occur. And since global debt levels are high—the second highest level in the past 150 years—it’s not exactly a stretch to conclude that another financial crisis is coming.

Analysts at Deutsche Bank recently released an extensive study that demonstrates the link between debt and crisis. One chart in particular screamed for attention.

They measured G-7 government debt levels, as a percent of GDP, and charted that figure against the number of crisis those countries have experienced. Here are the primary events they classified as a crisis or shock:

15% fall in stocks
10% decline in the country’s currency exchange rate
10% fall in bonds
A sovereign default
10% inflation rate

They logged every time a nation encountered any of these events within a one-year period, and compared that to government debt levels. It’s not hard to spot the correlation.

The Rest…HERE

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