If you’re debt is rising at a 45-degree and the wherewithal to pay that debt is only rising at a 25-degree angle, sooner or later you’re going to run out of money. From Matthew Piepenburg at goldswitzerland.com:
Every financial crisis ultimately boils down to a liquidity crisis, namely: Not enough fiat dollars to keep the financial wheels sufficiently greased.
Below, we look at two warning signs from Wells Fargo (NYSE: WFC) and the reverse repo market which warn of precisely that: a liquidity crisis.
From Debt Binge to Credit Crunch: A Chronicle of Excess
In a world in which consumers, corporations, and sovereigns have falsely confused debt-based growth as actual growth, a liquidity crisis is not a theoretical debate, but a mathematical certainty.
For years, self-serving politico’s, central bankers, Wall Street sell-siders, and a woefully unsophisticated cadre of main stream financial “journalists” have endeavored to downplay this rise-and-“pop” certainty by deliberately ignoring the $280T debt elephant in the global living room.
Of course, that debt, for years, has been “monetized” by increasingly debased currencies and rising money supplies created literally from central bank mouse-clicks rather than productivity, as evidenced by the embarrassing fact that global GDP is less than 1/3 of the global debt.
Needless to say, money (i.e., “liquidity”) created out of thin air, and then justified with even thinner (yet comfortably titled) policies like Modern Monetary Theory has its temporary charms.