Too much debt enervates and eventually destroys an economy. From Schiffgold at schiffgold.com:
Another hotter than expected CPI print in January put even more pressure on the Federal Reserve to do something about inflation. Suddenly, there is talk of a 50 basis point interest rate hike at the next FOMC meeting.
But “doing something” is is easier said than done, particularly in this zombie economy.
The Fed has gotten itself into a tight spot. Raising rates will expose another major economic problem that lurks just under the surface.
The world is buried in debt.
Economist Daniel Fernández Méndez described the 21st century as the “decade of debt.”
And if things continue the way they are, it could well be called the century of the great debt default.”
We’ve talked a lot about the massive levels of debt piled up by the federal government during the pandemic. But that’s just the tip of the iceberg. In 2021, US consumer debt grew at the fastest pace in five years. And then we have corporate debt and the proliferation of “zombie companies.”
Could this lead to a “Minsky Moment” — the point at which it becomes impossible for debtors to pay off their debts?
Daniel Fernández Méndez thinks it could.
The following was originally published by the Mises Wire. The opinions expressed are the authors and don’t necessarily reflect those of Peter Schiff or SchiffGold.
More and more economists and finance specialists are warning of the potential arrival of a new “Minsky moment.” The last time this term was used with such conviction was in 2008 at the onset of the Great Recession. It seems that 2021–22 could have some parallels with the world’s last severe recession.
