Global Super Debt “Tipping Point” 2012
In his latest investor letter (via Gurufocus), Kyle Bass lays out his case that a wave of hard defaults is coming. His basic argument: The world is just saddled with too much debt. Throughout history, he says, total debt-to-GDP only ever breached 200% when nations were spending on war. Today we’re at 310%. Says Bass: “There is no savior large enough with a magical pool of capital to stave off this unfortunate conclusion to the global debt super cycle. We think hard defaults are imminent.”
In August of 2010 I wrote a predicton about the coming super debt cycle and its impact on the United States, “Specifically the Cardinal Climax will hit the U.S. natal Venus and Jupiter. Venus has rulership over a nation’s money supply and the value of its currency, and Jupiter has rulership over its institutional holdings and sovereign wealth. President Obama is poised to increase the U.S. debt to a level that exceeds the value of the nation’s annual economic output, or Gross National Product (GNP), a step toward what has been termed as “debt super cycle.” This “debt super cycle trend” suggests that U.S. economic growth will not be enough to support excessive borrowing if interest rates go up instead of down. Therefore, we will likely see a dramatic contraction of the U.S. money supply (almost matching the decline seen from 1929 to 1933), despite near zero interest rates and the biggest fiscal bailout blitz in history.