Thursday, July 09, 2015

Here is How The Next Tech Crisis Will Play Out

The Fuse on the Global Debt Bomb has been lit. We are now officially in the Crisis to which the 2008 Meltdown was just the warm up.

All told, globally there are $100 trillion in bonds in existence today.
A little over a third of this is in the US. About half comes from developed nations outside of the US. And finally, emerging markets make up the remaining 14%.
Over $100 trillion...the size of the bond bubble alone should be enough to give pause.
However, when you consider that these bonds are pledged as collateral for other securities (usually over-the-counter derivatives) the full impact of the bond bubble explodes higher to $555 TRILLION.
To put this into perspective, the Credit Default Swap  (CDS) market that nearly took down the financial system in 2008 was only a tenth of this ($50-$60 trillion).
What does all of this mean?
The $100 trillion bond bubble will implode. As it does, the financial system will begin to deleverage as debt is defaulted on or restructured (reducing the amount of US Dollars in the system, pushing the US Dollar higher).

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