Historic Global Financial Crisis? “Puzzle Pieces” Will Soon Fit into Place
The public debt of this major nation reaches 99.5% of GDP – prepare for what may be next
by Bob Stokes
Updated: February 04, 2021
A buildup of an unsustainable amount of debt generally precedes devastating deflationary episodes.
The last brush the world had with deflation was the 2007-2009 financial crisis, which was accompanied by a huge amount of bad debt in the mortgage market. That financial crisis was the most severe since the Great Depression of the early 1930s, which itself was preceded by a mountain of unsustainable debt.
As Robert Prechter's Conquer the Crash says:
A high-debt situation becomes unsustainable when the rate of economic growth falls beneath the prevailing rate of interest on money owed and creditors refuse to underwrite the interest payments with more credit.
The signs show that the global financial system may be approaching a tipping point.
The United Kingdom is a case in point. Here's a chart and commentary from our January 2021 Global Market Perspective:
[In the U.K.], the treasury took on another £31.6 billion in debt in November alone, 40% more than October, while public debt hit almost £2.1 trillion, or 99.5% of GDP, the highest ratio since 1962. Meanwhile, the deficit will widen to about £400 billion in 2020/21, or about 20% of GDP, according to the Office for National Statistics. That represents double the hit caused by the 2008 financial crisis. As we have been describing for most of the year, all of the puzzle pieces for the greatest financial crisis in history will soon be in place.
The U.K. is hardly the only place in the world where debt is reaching an alarming level.
Here's what a Jan. 18 Wall Street Journal article says about the U.S.:
At 100.1% of gross domestic product, debt already exceeds the annual output of the economy, putting the U.S. in company with economies including Greece, Italy and Japan.
This headline is from the Toronto Star on Feb. 1:
Canada's debt-to-GDP ratio is alarming.
The list of nation's with troubling amounts of public debt goes on.
Our Global Market Perspective provides more insights on the potential for a historic financial crisis.
Get the details you need by following the link below.
You Can Know What All Global Investors Want to Know...
...Namely, "What's driving global stock indexes, cryptocurrencies, rates, metals, energy and other key markets?"
That's the question all professional money managers and retail investors alike want answered.
The problem is: Most speculators look to the headlines for their answer. They're searching for the "trigger" that reveals the direction of prices.
But, EWI's extensive research reveals that news does not drive the trend of financial markets.
The answer is: collective investor psychology. That's the insight that every investor is seeking.
You see, Elliott waves reflect the repetitive patterns of this collective psychology. In other words, when an investor knows the message of the Elliott wave pattern of a financial market, that investor can prepare for what's next with a high degree of confidence.
Learn what our analysts are saying about 50+ worldwide markets by reading the new February Global Market Perspective, which is set to publish on Feb. 5.
Just follow the link below and you'll be "good to go."
Commodity prices have taken a tumble during the past several days. A financial website says the decline is due to the "China crackdown" and "rising dollar." Yet, Elliott wave analysis foretold of the price drop when commodities were still rallying. Take a look at this chart.
See the Trader’s Classroom forecast and Elliott wave pattern that anticipated a rally which saw US Steel nearly double in price.
Ever heard of the acronym FOBI? It was coined here at Elliott Wave International and stands for the "fear of being in." Yes, just the opposite of the better-known acronym FOMO (fear of missing out). Here's an explanation.