The untold story of the world economy — so far at least — is the potentially explosive interaction between the spreading trade war and the overhang of global debt, estimated at a staggering $247 trillion. That’s “trillion” with a “t.” The numbers are so large as to be almost incomprehensible.
Households, businesses and governments borrow on the assumption that they will service their debts either by paying the principal and interest or by rolling over the debts into new loans. But this works only if incomes grow fast enough to make the debts bearable or to justify new loans. When those ingredients go missing, delinquencies, defaults and (at worse) panics follow.
Here’s where the trade war and debt may intersect disastrously. Since 2003, global debt has soared. As a share of the world economy (gross domestic product), the increase went from 248 percent of GDP to 318 percent. In the first quarter of 2018 alone, global debt rose by a huge $8 trillion. The figures include all major countries and most types of debt: consumer, business and government.
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Socialist Alexandria Ocasio-Cortez says that capitalism will not always exist:
Maybe she is right, and perhaps this debt is the reason why. There is no way this can end well.
What we need to start asking ourselves is "what comes after?" How will billions of people survive after the system collapses? And believe me when I say that "prepping" is not the answer. The hungry hoard will find you, kill you, and devour your larder in a flash.