Global debt soars to 356% of GDP

[Gyfts]

COVID has been the best thing to ever happen to Bitcoin, nearly every developed country relied on "borrowing" in order to mitigate the short term economic effects of COVID to provide relief, but at some point, you have to end up paying back the money you printed. You will see countries default and their currencies crash.

The most speculative tech stocks have risen in just about the same proportion as bitcoin since the start of the pandemic. There's been nothing inherently special about bitcoin in this regard. The money printer is raising the tide of all speculative assets at about the same rate.

Also, countries don't have to pay back the money that was printed. That's kind of the whole issue with central banks.

The stock market isn't an accurate reflection of where the economy is at, but to your point, the central banks don't have to pay back any money -- but they do if they want to retain public confidence. If a country fails to pay back any "loaned" amount of money, the currency turns to dust. So the incentive to not default is there.

[mindrust]

The stock market isn't an accurate reflection of where the economy is at,

Correct. How come stonks still go up when almost nobody is working or at least half of the world economy is destroyed? The answer is: Stimulus money. The growth is fake.

They are doing everything they can to stop the collapse and hoping that they can print enough till things go back to normal but what if it doesn't in the next 10 years? Then I guess everybody will have to live on the government checks forever...

[Poker Player]

The stock market isn't an accurate reflection of where the economy is at,

Correct. How come stonks still go up when almost nobody is working or at least half of the world economy is destroyed? The answer is: Stimulus money. The growth is fake.

I hope the same thing doesn't happen, but in the Weimar Republic (Germany) before the hyperinflation period, there was a very bullish period in the stock market. Simply because, as you say, when money is massively printed, much of it ends up in the stock market.

[Gyfts]

The stock market isn't an accurate reflection of where the economy is at,

Correct. How come stonks still go up when almost nobody is working or at least half of the world economy is destroyed? The answer is: Stimulus money. The growth is fake.

They are doing everything they can to stop the collapse and hoping that they can print enough till things go back to normal but what if it doesn't in the next 10 years? Then I guess everybody will have to live on the government checks forever...

It's stimulus but it's also because the stock market is reckless with speculation. I wouldn't be surprised to see a bunch of new investors throw in 600 USD into whatever stock they want causing an artificial rise though.

BTC can be the same way to be fair, but you can't measure the economy based on stocks. Look at Tesla's stock, it's a bubble on the verge of being popped, and this will happen regardless of where the economy's at.

[Sithara007]

It's stimulus but it's also because the stock market is reckless with speculation. I wouldn't be surprised to see a bunch of new investors throw in 600 USD into whatever stock they want causing an artificial rise though.

BTC can be the same way to be fair, but you can't measure the economy based on stocks. Look at Tesla's stock, it's a bubble on the verge of being popped, and this will happen regardless of where the economy's at.

The rise in stock market was not solely due to speculation. The stocks that rose the most are Apple, Amazon.etc. If you look at the quarterly results for these stocks, then you can see that their performance was really good. Amazon sales increased by a lot during the pandemic period and some of the Apple products also achieved record revenues. The same can be said about Tesla. Their 2020 revenues were almost double that of the revenues for 2019. So I would disagree if you claim that the stock market rally is looking like a bubble.

[Xinarae*]

Due to the epidemic, many people have lost their jobs in the informal sector in the last few months production has declined in the agricultural and industrial sectors and many organizations have lost income in the service sector. To offset these losses, the government has increased allocations in various sectors and adopted action plans in order to boost economic growth the impact of COVID-19 has reduced exports due to prolonged global lockdown and the failure to achieve the desired growth in expatriate income has led to revision of GDP growth in the current financial year. The demand in the stock market has increased.

[Smartprofit]

It's stimulus but it's also because the stock market is reckless with speculation. I wouldn't be surprised to see a bunch of new investors throw in 600 USD into whatever stock they want causing an artificial rise though.

BTC can be the same way to be fair, but you can't measure the economy based on stocks. Look at Tesla's stock, it's a bubble on the verge of being popped, and this will happen regardless of where the economy's at.

The rise in stock market was not solely due to speculation. The stocks that rose the most are Apple, Amazon.etc. If you look at the quarterly results for these stocks, then you can see that their performance was really good. Amazon sales increased by a lot during the pandemic period and some of the Apple products also achieved record revenues. The same can be said about Tesla. Their 2020 revenues were almost double that of the revenues for 2019. So I would disagree if you claim that the stock market rally is looking like a bubble.

Tesla is an electric car company.  Is it fair to say that most people have given up on combustion vehicles and started driving in electric vehicles?  Of course not.

One of the reasons for the rise in Tesla shares is precisely the fact that this company does not yet have real results of activity. 

Tesla is pure innovation.  Fantasies about the future can cost more than real material things.  This is what we observe. 

The situation is similar with Bitcoin and other cryptocurrencies.  Assets like Tesla shares and Bitcoin can be very expensive. 

At the same time, the main goal is to avoid inflation in consumer markets (rise in prices for food and household goods).

[gmreal1]

I don't have any debt right now. I feel I'm missing out, if there is some inflation in the end, it's better to have some debt at a low fixed rate, then inflation will basically pay back your debt. If you're fiat rich on the other hand, inflation will eat your savings.

You are making a mistake comparing your debt and government debt. It is totally different what you do and what the government does and in economics this is considered a major fault to compare micro and macro scale.
This is called "fallacy of composition" and it is common mistake for people with very limited knowledge of economics.

Also the high debt doesn't necessarily mean that inflation will rise. You need to understand that high debt to be combated requires less liquidity in the market. In case the government keeps printing new money then inflation will reach higher and may even reach hyper inflation as we have seen in history. The countries that didn't officially declare bankruptcy but combated high debt and assured lenders by paying back the loans, they succeeded in having their economies less devastated and free of inflation. It is a lose-lose scenario, however it is about how to proceed with having the less dire consequences.

In case of cutting liquidity, inflation and debt can be combated, but a prolonged recession is also almost certain.

The stock market isn't an accurate reflection of where the economy is at,

Correct. How come stonks still go up when almost nobody is working or at least half of the world economy is destroyed? The answer is: Stimulus money. The growth is fake.

They are doing everything they can to stop the collapse and hoping that they can print enough till things go back to normal but what if it doesn't in the next 10 years? Then I guess everybody will have to live on the government checks forever...

This is the way for most governments to deal with extreme economic situations. It is the worst decision to make and it a result of populism and a fake support to the economy. Living in the EU I can't say I am happy with the monetary policy of the pandemic, however the EU Central Bank reacted with a stricter approach than the FED.
A big problem that nobody addressed so far is how all this stimulus money will be paid back. Because even in Keynesian economics there is balance and a need to answer that. Governments can't keep printing and increasing debt forever. The US having in their soil the top three or four major rating agencies (S&P, Moody's,Fitch) they can manipulate their economy and bonds ratings for more years and have them at triple-A, even in the case the economy will collapse. We have seen how these agencies work during the housing crisis in 2008 having rated 45,000 failing securities as triple-A. Stonks kept going up and only a few foresaw the looming disaster.

[oHnK]

Tesla is pure innovation.  Fantasies about the future can cost more than real material things.  This is what we observe. 

The new innovations created by Tesla make this company very attractive positioning for investors.  Because with the new technology it is developing, it is one of the reasons for its rising shares.  Same with the actions of the owner buying BTC and being open to new innovations in the currency world, showing that this company is aware of every possibility that exists in the future.  Have a visionary and pioneer thinking.  I think this is quite representative of the increase in Tesla stock.

[bryant.coleman]

Tesla is pure innovation.  Fantasies about the future can cost more than real material things.  This is what we observe. 

The new innovations created by Tesla make this company very attractive positioning for investors.  Because with the new technology it is developing, it is one of the reasons for its rising shares.  Same with the actions of the owner buying BTC and being open to new innovations in the currency world, showing that this company is aware of every possibility that exists in the future.  Have a visionary and pioneer thinking.  I think this is quite representative of the increase in Tesla stock.

Agreed. In this aspect Tesla and Bitcoin are very similar. Tesla represents the future of automobile industry, while Bitcoin represents the future of payments industry. Tesla and Bitcoin in 2020s will be similar to what Apple and Amazon was in the 1990s. But still in case of Tesla, I believe that it's P/E of >1,000 is a bit high for my liking. Similarly, even Elon Musk is now saying that Bitcoin prices look high.

[aesma]

I wonder if governments are still justifying their massive piles of debt with the excuse of "low interest environment therefore we don't need to worry about servicing costs on the debt" now that long term market rates on bonds have hiked again.

These are debt levels that have not been seen since WWII - and in some cases, totally unwarranted stimulus packages.

The result is highly inflated asset prices, arbitrary pump & dumps on random stocks, and a real risk of reflation gone wrong in the near future. You'd be delusional to think that this system is sustainable under this type of stress.

As long as the governments can sell debt at the same low rate, then no. If things change, we'll see what happens.

[mindrust]

I wonder if governments are still justifying their massive piles of debt with the excuse of "low interest environment therefore we don't need to worry about servicing costs on the debt" now that long term market rates on bonds have hiked again.

These are debt levels that have not been seen since WWII - and in some cases, totally unwarranted stimulus packages.

The result is highly inflated asset prices, arbitrary pump & dumps on random stocks, and a real risk of reflation gone wrong in the near future. You'd be delusional to think that this system is sustainable under this type of stress.

As long as the governments can sell debt at the same low rate, then no. If things change, we'll see what happens.

I am not the bond expert but doesn't the rising bond yields mean that the US is having hard time with selling their debt? And as far as I know the FED is their primary customer that buys most of the US debt by printing money. (the other one is China)

We may have reached the end of the road.

[tygeade]

Hmmm, just saw someone’s comment that covid19 is a good thing because it caused the developed countries to be borrowing money. Seriously? I don’t see anything good about that, because if there is a situation that will cause the developed countries to be borrowing money, what about the developing countries?

These ones are likely to borrow ten times (10×) of what developed countries will borrow, and the worst part of it all is that they are still not going to achieve anything with it because their corrupt leaders will end up squandering the borrowed loans. I am not in support of that man.

[mindrust]

Hmmm, just saw someone’s comment that covid19 is a good thing because it caused the developed countries to be borrowing money. Seriously? I don’t see anything good about that, because if there is a situation that will cause the developed countries to be borrowing money, what about the developing countries?

These ones are likely to borrow ten times (10×) of what developed countries will borrow, and the worst part of it all is that they are still not going to achieve anything with it because their corrupt leaders will end up squandering the borrowed loans. I am not in support of that man.

The world economy is a house of cards right now. Small or big even if a bankrupt country like Turkey or Greece goes down it will take everything down with them. Just like how they could only afford the bankruptcy of Lehman's because it wasn't big enough but not the others (Deutsche B is pretty collapsy imo); now this is even worse than what it was in 2008.

No matter how shitty a business is, once you become big enough and fool enough people, you'll get bailed forever by the government which means by everybody.

A financial system like this will only end up being one thing: Slavery.

[kooboat]

The economic  downtrend  across  the globe  can be explained  with all the economic  jargons but nothing would surpass covid-19. In simple terms, the global economic  hardship is largely  due to the covid-19 pandemic. Many  businesses  have collapsed and the result  is evident. In many parts if the world,  people  have lost their livelihood  due to low or lack of demand  for their  services.

[darewaller]

The new innovations created by Tesla make this company very attractive positioning for investors.  Because with the new technology it is developing, it is one of the reasons for its rising shares.  Same with the actions of the owner buying BTC and being open to new innovations in the currency world, showing that this company is aware of every possibility that exists in the future.  Have a visionary and pioneer thinking.  I think this is quite representative of the increase in Tesla stock.

Agreed. In this aspect Tesla and Bitcoin are very similar. Tesla represents the future of automobile industry, while Bitcoin represents the future of payments industry. Tesla and Bitcoin in 2020s will be similar to what Apple and Amazon was in the 1990s. But still in case of Tesla, I believe that it's P/E of >1,000 is a bit high for my liking. Similarly, even Elon Musk is now saying that Bitcoin prices look high.

I do not believe that "a better future deserves more money" deal anymore, sure Tesla was offering something great and that is why many people invested into it, and they all got a car for themselves if they can afford it, but the reality is that we are not in a situation like that anymore, we are in a "change something right now" situation and Elon did earned all his money already, but we should definitely invest that much money into research as well.

There are so so so many research stuff in the world that will not give us a car, and that is why we are not getting it, we could have a lot more food, we could have a lot more shelter, we could have better climate that is not killing us, we could beat cancer, we could maybe even cure aids, basically we could save the world if we just didn't give money to things that gave us something back, if we just gave money for improvement. That is called donation obviously but we do not donate nearly enough to academic research.

[davis196]

If stocks die, everything dies. Forget bitcoin or anything else, we'll be back to agriculture. If your country is alright with socialism during a disaster then you're fine- if not it might be problematic.

Realistically countries could just all print themselves out of their debt (like has been proposed many times with the euro). 

Forget bitcoin being stable or worth anything if your Internet firm can't get power (or you).


Countries print money to solve stagflation,.without the printing that has gone on -everything crashes and no one remains stable. Most economies in the west will have 12% of their gdp shaved off -the UK and a few other European countries stand to lose 40-50% of their gdp directly from investment banks.

Stock prices might crash severely,but I don't think that stocks will die as an investment tool.
The stock price crash might lead to US pension funds going bankrupt,which means no pensions for millions of people,which means huge decrease of consumer demand and another Great Depression in the USA.
I don't really think that socialism is a solution for any economic problem,but that's just me.
The money printing machine of the Federal Reserve System will cause a disaster for sure. 

[jackg]

Stock prices might crash severely,but I don't think that stocks will die as an investment tool.
The stock price crash might lead to US pension funds going bankrupt,which means no pensions for millions of people,which means huge decrease of consumer demand and another Great Depression in the USA.
I don't really think that socialism is a solution for any economic problem,but that's just me.
The money printing machine of the Federal Reserve System will cause a disaster for sure. 

They could always just switch currency...

And yeah socialism is a "not yet" type of system - because it's massively underdeveloped. You could potential see land ownership be nullified for 5 years or something (but with deed ownership still) to try to bounce the economy back to where it was by start g to get people producing food and then reducing the amount of people needed to those better at it. All you NEED is food, water, shelter and safety (eg healthcare and laws).

[mindrust]

The money printing machine of the Federal Reserve System will cause a disaster for sure.  

https://www.investing.com/equities/priceline.com-inc

Nobody can leave the country, nobody can have a vacation outside of their country, tourism business as a whole has collapsed and yet BKNG is at its ATH. How is that possible?

[Sayeds56]

Covid-19 is the major reason of sudden increase in world debt. Governments have no option except to print Fiat currencies to meet with Heath care and compensation program needs and falling revenues. USA is not only Top economy of the world but also leads the list of countries with most External and internal debt.