by Chris Marcus, Miles Franklin:
Borrow and spend! Debt and bubbles. Happy days are here again.
Unpleasant consequences will result from imploding bubbles in corporate debt, housing, student loans, stock markets, sovereign debt, cryptocurrencies and others.
Official U.S. Federal government national debt exceeds $21 trillion and has doubled every 8 to 9 years for decades.
- The owners of that debt paper expect to be repaid with interest.
- Payments will be made by issuing new debt.
- Bubbles, whether sovereign debt, stocks, or housing, pop. Example: Dot-com stocks in 2000 and the Housing Bubble in 2008. Charles Hugh Smith added notes to this graph of the Home Price Index.
What about the NASDAQ 100 Index? The NASDAQ is wildly over-valued or in a bubble. Note the very high monthly RSI at the bottom.
Individual stocks have also risen into bubbles. They will rise… until they can’t. Maybe this week, maybe next year… Look out below!
WHAT IS NEARLY CERTAIN?
Debt will increase. National debt, corporate debt and other debts expand. However, no index, stock, or pile of dodgy debt can grow forever. Those bubbles will pop someday.
The S&P 500 Index will rise and fall, but because the dollar is devalued by excessive debt and currency creation, the S&P will rise long-term. However, its rise, based on history, will be slower than the national debt. Examine this chart (quarterly data) for the ratio of the S&P 500 Index (times one trillion) divided by official U.S. national debt.
The chart shows that debt increases more rapidly than the S&P. The S&P peaked in 2000, 2007, and 2018. The next significant move for the S&P is probably down.