What happens when central banks push interest rates to zero – in some cases below zero – and hold them there for nearly a decade?
You get debt.
Lots and lots of debt.
Record levels of debt, in fact.
Student loan debt has grown to over $1.5 trillion. And that just accounts for loans held by Federal Student Aid. It doesn’t include private loans. Meanwhile, the Department of Education says 43% of those government-backed loans are considered “in distress.”
In a speech last month, Education Secretary Betsy DeVos put the current level of student debt in perspective.
One-point-five trillion dollars is almost impossible to fathom. So, let me put it this way: $1.5 trillion is more than $10,000 of someone else’s student loan debt for each and every American taxpayer—145 million of them.”
As WolfStreet put it, the $1.3 billion leveraged loan market has come unglued.
“Leveraged loans” are made to firms already deeply in debt. Think subprime loans for corporations. As with any risky loan, they could be difficult to either collect or resell in a downturn, putting both the borrower and lender at risk.
Americans took on another $10.9 billion in debt in September, according to data released by the Federal Reserve. That pushed total consumer debt to a seasonally adjusted $3.95 trillion. American indebtedness is growing at a 3.3% rate.
But there are signs that American credit card borrowing is slowing down and that’s not good news in an economy built on consumer spending and debt.
A rally in the last two days of the month was the lone bright spot in an abysmal October. It was the worst month for global equities in more than six years. Globally, stock markets lost 7.5%, their worst month since May 2012. Even with the late rally, it was the biggest monthly decline in the NASDAQ since ’08.
US stock markets closed up for the second straight day on the final day of the month. It was the first back-to-back days of gains in October. As Peter Schiff put it in his most recent podcast, it may have been Halloween, but the bulls had no fear.
The US Treasury plans to borrow another $425 billion in the final quarter of 2018, bringing total borrowing for the year to $1.34 trillion, according to a Treasury Department press release.
The 2018 borrowing level is expected to more than double 2017’s number.
Peter Schiff recently appeared on RT News with Rick Sanchez. Peter said both an economic and a political crisis is looming, and Americans need to get ready.