Sometime this year, world public and private plus unfunded pensions will surpass $300 trillion. That is not even counting the $100 trillion in US government unfunded liabilities. Oops.
These obligations cannot be paid. A time is coming when the market and voters will realize this.
Will voters decide to tax “the rich” more? Will they increase their VAT rates and further slow growth? Will they reduce benefits? No matter what they decide, hard choices will bring political turmoil.
And that, of course, will mean market turmoil.
The Great Reset Will Cause a Horrible Global Recession
We are coming to a period I call “the Great Reset.” As it hits, we will have to deal, one way or another, with the largest twin bubbles in the history of the world. One of those bubbles is global debt, especially government debt. The other is the even larger bubble of government promises. The other is the even larger bubble of government promises.
History shows it is more than likely that the US will have a recession in the next few years. When it does come, it will likely blow the US government deficit up to $2 trillion a year.
Obama took eight years to run up a $10 trillion debt after the 2008 recession. It might take just five years after the next recession to run up the next $10 trillion.
Here is a chart my staff at Mauldin Economics created in late 2016 using Congressional Budget Office data. It shows what will happen in the next recession if revenues drop by the same percentage as they did in the last recession (without even counting likely higher expenditures this time).
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