I'm no market guru or financial genius. I'm just going for a common sense reaction, that often gets lost in the exuberance. We have student loan debt in the trillions. I've sold houses to people on welfare, people who put not a cent down, etc. People talk about no doc loans of the early 2000s. We now have no doc debt.
I get mailers daily offering 30k in lines of credit. My 18 year old brother said he could not get a credit card. We were out to dinner, so I said hand me your phone. Within five minutes, I had him a couple credit cards. He had no credit history and no job. There is zero income verification these days. In the 90s I worked in retail, and if you applied for a credit card, we had to call into a call center where they asked you all kinds of info about your job, income, etc. Now, they just need a pulse.
Another concerning factor. Rough numbers here from memory, but there are something like 13 trillion dollars in transactions in the US every month. However, we only have about 500 billion in actual currency in circulation. Much of that is under mattresses, overseas, in bank vaults, or otherwise not in real circulation. We probably only have about 250 billion in actual cash floating around. Think about it. If you went to the ATM or went to swipe your card, and the banks weren't working, how much cash could you muster? Why is that important? Well, if we do have a global financial meltdown like 1929, and the government can't step in and save the day because they are broke, then we realize the banks are playing with monopoly electronic money instead of real dollars, well, everything would freeze instantly.
China has been buying much of our debt. Where are they getting the money? They print it out of thin air to keep their currency low so they can dump their goods on the world market for cheap and keep the factories turning. But the machine is screeching to a halt. Who is going to buy our debt now? The banks are throwing money at deeply leveraged borrowers because the government is throwing cheap money at the banks, which is coming from China and Japans paper money (Japan is printing like crazy too). Our "consumer spending", which is debt based, is the only thing keeping us afloat. So everything is air. Then the banks multiply this air by doing so many electronic transactions that don't even have real cash behind them.
Just read this amazing article. http://www.marketwatch.com/story/this-is-how-much-...
We talk about all the derivatives in the bubble in 2008 causing a crash where people were betting on bets with no substance behind it. This article says there is about 1.2 quadrillion in global derivative markets right now!!! Compare that to a paltry 7 trillion in global commercial real estate (likely overheated). That alone is a scary, scary thing (unless someone can tell me how I"m wrong). When global bets on markets far exceeds any tangible economic assets. Not only that, We have added about 30 percent of our huge debt in the last decade.
Quote "Funds invested in derivatives alone total $1.2 quadrillion. In fact, there is more money in derivatives than in all the stock markets combined, which is a comparatively paltry $70 trillion. The U.S. accounts for roughly half of the global market cap thanks to companies like Apple Inc. AAPL, +1.05% Alphabet Inc.GOOGL, +0.06% and Microsoft Corp. MSFT, -1.50%
Investment in commercial real estate, often the most visible symbol of wealth, pales in comparison to stocks or derivatives at $7.6 trillion.
As for money owed by every single person and country in the world, the grand total is $199 trillion, with some 29% of it borrowed since the 2008 financial crisis.
The U.S. is responsible for nearly one-third of that global debt, while Europe follows at 26% and Japan at 20%. China, for all the criticism about its debt-fueled economic growth, owes 6% of the total."
When smart people like Michael Burry and other super rich people are buying up farm land and investing in seeds, and our government is investing in bullets and crowd control devices, it is very scary to ignore the signs that will have seemed so obvious in retrospect. No I am not a doomsday prepper, lol. But I am not buying any more real estate unless the deal is unbelievable or I am willing to hold it long term.
