Nothing is forever, not even debt[1]. Every borrower eventually either repays what they owe or defaults. Lenders may or may not have remedies. But one way or another, the debt goes away.
One of Western civilization’s largest problems is we’ve convinced ourselves debt can be permanent. We don’t use that specific word, of course, but it’s what we do and is why government debt keeps rising.[2]
We borrow faster than we repay previous borrowing—and I mean governments everywhere, China as well as the US.
Our leaders have no real plan to reduce the debt[3], much less eliminate it. They just want to spend, spend, spend forevermore. And most citizens are okay with that.
As a result, I think we will spend the latter part of the 2020s going through a kind of worldwide bankruptcy. We won’t call it that, and it will take a lot of argument because we won’t have a court to take charge.
But we will collectively realize the situation can’t go on and find a way to end it. I’ve taken to calling this “the Great Reset.”[4]
Once the Great Reset is over, we’ll find a much better world waiting for us. Getting there will be the hard part.
The Artificial Boom
A decade of bailouts, QE, ZIRP, and so on encouraged everyone to lever up, and they have. Ray Dalio described this in his latest LinkedIn post[5].
Because investors have so much money to invest and because of past success stories of stocks of revolutionary technology companies doing so well, more companies than at any time since the dot-com bubble don’t have to make profits or even have clear paths to making profits...