The Coming Liquidation

by Hugo Salinas Price
18-Jun (24hgold) — Total world debt has been calculated recently at $223 Trillion dollars. World debt has increased some 40% since the crisis of 2008-2009; as I recall, it was about $157 Trillion at that time. The $223 Trillion is actual debt, and does not include the potential debt lying in derivates of this debt, which is another humongous amount and would become debt should there be any default on the $223 Trillion world debt.

The $223 Trillion world debt is like a huge cloud up in the sky.

It is of vital importance for the world of finance, as it presently exists, that the $223 Trillion world debt continue up in the sky, and that it not be subject to liquidation.

Liquidation and payment are two different things.

Liquidation means that holders of debt seek to exchange the debt they hold, for cash.

The problem for the world’s central bankers is to keep the debt cloud up in the sky and avoid at all costs a deluge of liquidation. That is to say, there must be no movement to get rid of bonds in exchange for cash.

World debt will continue to be a massive cloud up in the sky, as long as investors wish to own bonds; since central banks drove down interest rates all over the world to absurdly low levels – even to negative interest rates – prices of previously issued bonds rose to equally absurd levels and thus created huge profits for those who owned those bonds.

World debt is not being paid down and has to grow, because the debt is being rolled-over, and rollovers include interest due. So the debt cloud has to get bigger.

…Interest rates will have to rise, sooner or later; central bankers tremble when they see the slightest sign that interest rates are ticking up. Obviously, the FED and ECB cannot even think of raising interest rates; they are trapped and wait in dread for the deluge of bond liquidation when the $223 Trillion debt cloud hanging over the world turns into a cloudburst.

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PG View: This will not end as well.