An Australian economist who predicted the 2008 financial crisis now says another crash is “almost inevitable.”
Steve Keen heads the economics department at Kingston University in London. He was one of the few academics to anticipate the subprime housing crisis. On his advice, French investment bank BNP Paribas announced it was shutting down three investment funds specializing in the US subprime market in 2007. At the time, the bank said it was struggling to calculate their values against a backdrop of growing concerns over liquidity.
In an interview on RT’s Keiser Report, Keen said another crisis is around the corner, and the problem this time is debt.
Debt in the US is the mother of all bubbles.
The US government is more than $20 trillion in debt, with actual unfunded liabilities pushing far higher. Meanwhile, American families have amassed more than $1 trillion in credit card debt alone.
During a speech at Cambridge House IMWC earlier this summer, Peter Schiff discussed the massive levels of government, corporate, and personal debt in the US and how it will eventually take the air out of America’s bubble economy.
Peter starts the speech by showing the economy isn’t nearly as great as the mainstream pundits claim. He highlights the massive levels of debt, how the government manipulates employment numbers, and the very real problem of inflation. Then he shows how Federal Reserve policy has gotten us into this predicament and the choice it will ultimately be forced to make. Peter says in the end, the Fed will sacrifice the dollar.
We live in a world full of bubbles just waiting to pop.
We have reported extensively on the stock market bubble, the student loan bubble, and the auto bubble. We even told you about a shoe bubble. But there is one bubble that is bigger and potentially more threatening than any of these.
The massive debt bubble.
Could the country’s pension mess be more widespread than we even realize?
Martin Armstrong of Armstrong Economics thinks so. He says, “under no circumstances assume that any government pension will actually be paid.”
And he means even government pensions in states now considered economically sound.
Illinois’ credit rating is on its way to “junk” status.
According to an AP report, S&P Global Ratings recently warned it will likely lower Illinois’ creditworthiness to below investment grade if feuding lawmakers fail to agree on a state budget for a third straight year.
The Federal Reserve nudged up interest rates another .25 points last week. Of course, nobody was surprise by the central bank’s move. It was widely expected. Nevertheless, the Fed’s latest policy move has everybody bullish on increasing rates into the future
Of course, nothing has fundamentally changed. As Paul Singer said earlier this month, the financial system is no more sound than it was in 2008. All of this talk about rate hikes will vanish like a vapor if actual economic data continues to point toward a slowdown.
But since everybody is talking rate hikes right now, this is probably a good time to consider just how rising interest rates will effect your wallet.
The debt time bomb continues to tick. There is growing evidence that we’re getting close to an explosion.
And what do we have to show for trillions in borrowing?
Not a whole lot.
A Bloomberg article published this week proclaimed America has a debt hangover resulting from a half decade of “binging on credit.” The percentage of overdue debt has risen two straight quarters and consumer companies say customers are under stress. On top of that, bankruptcies are rising.