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Why the Next Debt Crisis Will (Also) Be Historically Dire

“Rising interest rates will reap a storm of biblical proportions.”

by Bob Stokes
Updated: March 03, 2020

The severe beating that the U.S. and other stock markets around the globe have taken brings to mind the subject of deflation.

Why?

Well, when you stop and think about it, the last brush that the global financial system had with deflation was from 2007 to early 2009. People forget that the financial crisis -- the biggest since the Great Depression -- was preceded by the start of a major downturn in the stock market. Likewise, the deflationary depression of 1929 to 1933 was also preceded by a historic peak in stocks, the 1929 crash.

That's not to say that the major stock market turmoil that erupted on Feb. 24 is guaranteed to trigger a historic deflation. However, consider some recent analysis from Elliott Wave International's Head of Global Research, Murray Gunn.

As you look at this chart from his Feb. 13 Interest Rates Insights, keep in mind that the Greek term "Rho" refers to interest rate sensitivity, thus the double-meaning of the cartoon.

USHouseholdDebtService

Murray notes:

Even though household debt is at a record high, incredibly, debt service payments as a percentage of disposable income are at a 40-year record low!

Should interest rates start to rise now, debt service costs will explode higher. That would result in debt deflation on a massive scale...

The Fed knows that rising interest rates will reap a storm of biblical proportions. That is why it is trying to artificially suppress short-term interest rates through its money market operations. In the end, it can't succeed. Interest rates will rise again and, when they do, be prepared for a debt crisis the likes of which has never been seen before.

One way to prepare is to regularly read Murray's interest rates analysis. He also provides insights into rates in our monthly Global Market Perspective, which covers over 40 global markets, from stocks to bonds to gold and beyond.

You can read the current Global Market Perspective with a 30-day, risk-free trial right now. Just follow the link below.

Interest Rates Perspective: Extensive International Experience Matters …

… and Murray Gunn, Elliott Wave International’s Head of Global Research, brings you that experience.

Before he joined EWI, Murray worked as a fund manager in global bonds, currencies and stocks, including long posts at Standard Life Investments and the Abu Dhabi Investment Authority. He then joined HSBC Bank as Head of Technical Analysis.

Plus, Murray is an Elliott wave expert.

No small achievements – and, as you might imagine, there are more.

The point is that Global Market Perspective subscribers receive analysis and forecasts from the perspective of a pro who has “been around” – who offers you extensive global financial insights.

See for yourself as you tap into the comprehensive Global Market Perspective, risk-free for 30 days.

Follow the link below to get started now.

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