The One Chart Your Money Manager Doesn't Want You to See
Oh yeah, I'm completely going to show it to you!
From the post-war period to the Reagan administration (1980), global government debt was very low and didn’t increase much.
Reagan (with Dick Cheney) said, “deficits don’t matter”, and off we went. The glide path of debt steepened. The crazy part was that Reagan/Cheney were right! Deficits don’t matter, neither does the amount of debt, and since we’re at it, neither do interest rates.
Why? Because global central banks now operate like a kind of fixed income hedge fund. They buy bonds when no one wants them. (And by “bonds” I mean government bonds and corporate bonds, even those that are illegal for them to buy, like Ford Motor paper.) Some of these central banks also buy equities (I’m looking at you BOJ and SNB), which makes them “multi-strat”.
Chart 1: Global Government Debt
Chart 1, above, shows the insane growth in global debt since 1952. There’s no end to this because the end of this would be a global depression (with a “D”) that would put us back into the dark ages.
What Your Money Manager Isn’t Telling You
If it’s no big deal, why make a big deal about it? Because every investment you have, or are contemplating, MUST be judged with this chart in mind. In short, how will your investment perform in an environment where government debt increases forever?
If your money manager can’t answer that question for every asset you own, you need a new one, because there will be huge winners and huge losers from the above. You won’t want to be in the losers column because there are many investments that could get wiped out in the coming years.
Who Will Be the Winners?
First, when every central bank is flooding the zone with liquidity and every country is debasing its currency against the U.S. dollar…