Thank you for this detailed breakup. The different kinds of debt are (intentionally) convoluted and interrelated, and I hadn't seen the scale of the problem, even though like most casual watchers of money, I had noticed the nature of it.
Obviously between the layers of complexity and the finger on the scale, it's hard to predict, but what magnitude of a debt default do you think would trigger the next 'crisis'? Would companies like Evergrande qualify?
Also, at a personal level, if you have a line of credit available at fixed rates, doesn't it make sense to take it on, since hyperinflation would allow you to pay it back less 'purchasing power' than you borrowed?
My pleasure ^_^ As for "the next crisis", as far as i'm concerned, we're still in it. Taper is on deck - Yes they're gonna try and stop QE and then raise rates and it'll be disasterous, Evergrande could do it at any given time, Gas could go nuclear at any given time because we have NO idea about long term weather. We can't possibly tell now if February is going to be cold, and that's usually the month to watch out for. Last winter was the coldest in 35 years here thanks to February.
Even if we do nothing and keep literally everything as is.... We're still gonna have a crisis because of hyperinflation caused by QE flowing into the real economy now. Even if the US doesn't blow up, the EU has to at some point. China can't keep building ghost cities, and if it does, in combination with the EV revolution Copper will go ballistic.
So again the problem is too big. There are no options here and if we do nothing the system collapses anyway. Which is the point of the article really - the crisis is already here, but it's been hidden all this time, it's just now rising to the surface.
As for a personal loan - i've been recommending people for the last year atleast that, if they have the option to consolidate debt with adjustable rates into a long term fixed rate loan, they should *absolutely* take that option. Obviously, no debt is best, because it allows you to take on debt at even more opportune moments then now. Remember - the more people lose out, the cheaper things get for people still in the game.
But if you already have debt, keeping any of it adjustable now is suicide. Credit card debt is nuclear waste, because believe you me - the *moment* the banks realize the jig is up and they don't benefit from keeping the old ways going anymore, fixed rate loans are going to disappear overnight, and the adjustable rate will stay ahead of CPI. And then, anybody else is screwed.
But honestly, considering the size of the problem (as well it now being more general knowledge that you can get fixed rate debt in hyperinflation and screw the bank that way).... Personally i'm scared the banks will retro-actively raise fixed rates too. It'll always be better then adjustable because whatever they decide will always lag inflation, so you'll still get a better deal again in a week or 2....
But damn me if we're not living in a world that's running on screwing eachother over as much as possible, and the people in charge especially really do *not* care what happens to the little people. When the system goes into panic survival mode, who the hell knows what'll happen. I've had family who've had loans in 2008 recalled wholesale by banks about to fall over but nobody knew yet, which put them deeper into debt.
I prefer to not take any risks this time around :D But if you're gonna go that route - don't time the top. Shoot for millionaire, not billionaire. The German guy who started that tactic, ended up going bankrupt too, because he failed to plan an exit: At some point, you can't pay off loans with loans, but you have to sell assets at inflated prices to settle the last one. And if there's no one left to buy at scale you're screwed. You'll get killed on any correction that halts hyperinflation, even for a while.
Deso thanks for your work. Been following for a while now. Just subscribed to your substack. Your writing is impeccable but there is one tiny thing that can be done better and I think would make people take you even more seriously. (please forgive me for maybe coming off as blunt - I am Dutch though ;)). One thing that disturbs me in your writing, and it has nothing to do with the content is this: you mix up the words then and than. Example: "....too big, rather then why". Should be.... rather than.
I am aware but i've neglected to just completely ignore it because it's a problem in this world that people expect and demand perfection. HOW can anyone not take me seriously when i write down this much and this detailed a info, in clearly high level language - but then not take me seriously cause i mess up then and than? *fuck* those people.
Also i refuse to write in Dutch because all Dutch people care about is spelling and they never absorb the info :D
I’ll explain why it bothers me and all of the people to whom I’ve sent your article so far, and why I think it will really limit the extent to which people take your work seriously. You’re writing about something I don’t understand (Big Finance) using something I do understand (English grammar). The fact that you’re not catching what seems like an obvious, glaring, *very basic* detail in an area I do understand makes it very difficult for me to trust that you’re not also missing an obvious, glaring, *very basic* detail in your Financial theory, given that I don’t have the expertise to recognize such an error myself. It makes you seem like a smart person who’s still prone to having huge blind spots, whether that’s true or not.
Yeah and that's why i don't care anymore. People like that don't actually care for the truth. They wanna read a well written article, and IMO, they should stick to novels that multiple editors went through.
They care more about where the information comes from, then the information itself. I am not looking for an audience like that, and will happily lose subs over it. I've blocked people on twitter over it actually.
And if you think THAT kind of mistake is worth not believing me over, WHOOO boy wait until you hear about the rest of my flaws that are far more impactful on my functioning.
Never discount where you pick up what information. The truth is the truth.
Yikes, this was a handful. The issue i have with this particular entry is that gold and silverbears have been calling for a crash for AT LEAST a decade. And it hasnt happened. In fact stocks and bitcoin vastly outperformed gold and silver. So for whatever its worth, the bubble could last another couple years. Why not ? Sure its there, but when will it pop. Why buy Silver or Gold now, when clearly it would have been a mediocre choice AT ANY POINT in the last 10 years. Why should today or tomorrow or the day after be any different than the last 3500 days.
Because i'm not a gold/silver bull or bear. I converted my life savings into silver and gold in December 2019, after the repo crisis happened and i realized gold and silver would never be this cheap again because the system was facing imminent failure. The US had gone broke and would never be able to stop QE.
Even with all shenanigans so far, i'm still up ~€7 an ounce on an average cost of €18,6 - WITH premiums that is. I'm not looking to get rich off the silversqueeze like GME or anything; i'm expecting it to happen naturally and eventually and when it does - everyone else will become poor. It's not a good thing. As i said this is protection from past foolishness. A necessity at this point.
Look again closely at the last chart i posted. That's capital expenditures from consumers, and producers. Clearly, producers are investing less, while consumers are consuming more. This difference HAS to be made up by either money printing or debt, and as i explained, it's both.
This time it's not different. Before every other crash, people didn't believe it could happen either. But fundamentals always matter, and i just wrote 11k words on how the fundamentals have never been this bad. And with the CPI up 5,4% even with all the ridiculous adjustments, how much more proof do you need?
(i *do* have another 140k words in the form of ebooks around this subject).
Thank you for this detailed breakup. The different kinds of debt are (intentionally) convoluted and interrelated, and I hadn't seen the scale of the problem, even though like most casual watchers of money, I had noticed the nature of it.
Obviously between the layers of complexity and the finger on the scale, it's hard to predict, but what magnitude of a debt default do you think would trigger the next 'crisis'? Would companies like Evergrande qualify?
Also, at a personal level, if you have a line of credit available at fixed rates, doesn't it make sense to take it on, since hyperinflation would allow you to pay it back less 'purchasing power' than you borrowed?
My pleasure ^_^ As for "the next crisis", as far as i'm concerned, we're still in it. Taper is on deck - Yes they're gonna try and stop QE and then raise rates and it'll be disasterous, Evergrande could do it at any given time, Gas could go nuclear at any given time because we have NO idea about long term weather. We can't possibly tell now if February is going to be cold, and that's usually the month to watch out for. Last winter was the coldest in 35 years here thanks to February.
Even if we do nothing and keep literally everything as is.... We're still gonna have a crisis because of hyperinflation caused by QE flowing into the real economy now. Even if the US doesn't blow up, the EU has to at some point. China can't keep building ghost cities, and if it does, in combination with the EV revolution Copper will go ballistic.
So again the problem is too big. There are no options here and if we do nothing the system collapses anyway. Which is the point of the article really - the crisis is already here, but it's been hidden all this time, it's just now rising to the surface.
As for a personal loan - i've been recommending people for the last year atleast that, if they have the option to consolidate debt with adjustable rates into a long term fixed rate loan, they should *absolutely* take that option. Obviously, no debt is best, because it allows you to take on debt at even more opportune moments then now. Remember - the more people lose out, the cheaper things get for people still in the game.
But if you already have debt, keeping any of it adjustable now is suicide. Credit card debt is nuclear waste, because believe you me - the *moment* the banks realize the jig is up and they don't benefit from keeping the old ways going anymore, fixed rate loans are going to disappear overnight, and the adjustable rate will stay ahead of CPI. And then, anybody else is screwed.
But honestly, considering the size of the problem (as well it now being more general knowledge that you can get fixed rate debt in hyperinflation and screw the bank that way).... Personally i'm scared the banks will retro-actively raise fixed rates too. It'll always be better then adjustable because whatever they decide will always lag inflation, so you'll still get a better deal again in a week or 2....
But damn me if we're not living in a world that's running on screwing eachother over as much as possible, and the people in charge especially really do *not* care what happens to the little people. When the system goes into panic survival mode, who the hell knows what'll happen. I've had family who've had loans in 2008 recalled wholesale by banks about to fall over but nobody knew yet, which put them deeper into debt.
I prefer to not take any risks this time around :D But if you're gonna go that route - don't time the top. Shoot for millionaire, not billionaire. The German guy who started that tactic, ended up going bankrupt too, because he failed to plan an exit: At some point, you can't pay off loans with loans, but you have to sell assets at inflated prices to settle the last one. And if there's no one left to buy at scale you're screwed. You'll get killed on any correction that halts hyperinflation, even for a while.
>How are you going to pay down a mortgage with the house itself after it's risen in value?
I don't follow this.
If the house gains value, you'll simply have more equity. The loan won't change.
Deso thanks for your work. Been following for a while now. Just subscribed to your substack. Your writing is impeccable but there is one tiny thing that can be done better and I think would make people take you even more seriously. (please forgive me for maybe coming off as blunt - I am Dutch though ;)). One thing that disturbs me in your writing, and it has nothing to do with the content is this: you mix up the words then and than. Example: "....too big, rather then why". Should be.... rather than.
Hope it helps. Have a nice day.
I am aware but i've neglected to just completely ignore it because it's a problem in this world that people expect and demand perfection. HOW can anyone not take me seriously when i write down this much and this detailed a info, in clearly high level language - but then not take me seriously cause i mess up then and than? *fuck* those people.
Also i refuse to write in Dutch because all Dutch people care about is spelling and they never absorb the info :D
Understood, my intent wasn't to break your balls. Your English is perfect. Keep rocking Deso.
I’ll explain why it bothers me and all of the people to whom I’ve sent your article so far, and why I think it will really limit the extent to which people take your work seriously. You’re writing about something I don’t understand (Big Finance) using something I do understand (English grammar). The fact that you’re not catching what seems like an obvious, glaring, *very basic* detail in an area I do understand makes it very difficult for me to trust that you’re not also missing an obvious, glaring, *very basic* detail in your Financial theory, given that I don’t have the expertise to recognize such an error myself. It makes you seem like a smart person who’s still prone to having huge blind spots, whether that’s true or not.
Yeah and that's why i don't care anymore. People like that don't actually care for the truth. They wanna read a well written article, and IMO, they should stick to novels that multiple editors went through.
They care more about where the information comes from, then the information itself. I am not looking for an audience like that, and will happily lose subs over it. I've blocked people on twitter over it actually.
And if you think THAT kind of mistake is worth not believing me over, WHOOO boy wait until you hear about the rest of my flaws that are far more impactful on my functioning.
Never discount where you pick up what information. The truth is the truth.
Yikes, this was a handful. The issue i have with this particular entry is that gold and silverbears have been calling for a crash for AT LEAST a decade. And it hasnt happened. In fact stocks and bitcoin vastly outperformed gold and silver. So for whatever its worth, the bubble could last another couple years. Why not ? Sure its there, but when will it pop. Why buy Silver or Gold now, when clearly it would have been a mediocre choice AT ANY POINT in the last 10 years. Why should today or tomorrow or the day after be any different than the last 3500 days.
Because i'm not a gold/silver bull or bear. I converted my life savings into silver and gold in December 2019, after the repo crisis happened and i realized gold and silver would never be this cheap again because the system was facing imminent failure. The US had gone broke and would never be able to stop QE.
Even with all shenanigans so far, i'm still up ~€7 an ounce on an average cost of €18,6 - WITH premiums that is. I'm not looking to get rich off the silversqueeze like GME or anything; i'm expecting it to happen naturally and eventually and when it does - everyone else will become poor. It's not a good thing. As i said this is protection from past foolishness. A necessity at this point.
Look again closely at the last chart i posted. That's capital expenditures from consumers, and producers. Clearly, producers are investing less, while consumers are consuming more. This difference HAS to be made up by either money printing or debt, and as i explained, it's both.
This time it's not different. Before every other crash, people didn't believe it could happen either. But fundamentals always matter, and i just wrote 11k words on how the fundamentals have never been this bad. And with the CPI up 5,4% even with all the ridiculous adjustments, how much more proof do you need?
(i *do* have another 140k words in the form of ebooks around this subject).