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As Bad As Things Were in 2007, They Are MUCH Worse Now

The 2008 episode was a brief period of deleveraging in a global debt super cycle extending back at least 30 years.


Rather than letting the bad debts clear through the system (this would have meant letting the large private banks go bust), the Global Central Banks printed over $13 trillion in new money and funneled it into the system.


Thanks to the wonders of leverage and derivative magic, this has resulted in an exponential increase in global debt loads. However bad things were in 2008, they are much MUCH worse now.


Here are total credit instruments in the US. That little dip was the “world is ending” episode in 2008.



This parabolic rise in debt occurred throughout the financial system. Today, there are literally bubbles in EVERY asset class under the sun.


The bond bubble is over $100 trillion and still growing (most nations don’t have the funds to pay back their debt, so they’re simply issuing new debt to cover old payments).


The largest increases have occurred in outside the US.



Stocks… well the picture below says it all: we’re in the third largest bubble relative to earnings in over 130 years. The two periods in which stocks were MORE richly valued ended in price collapses of 60%+.




Nowhere is the debt insanity more apparent than in the OTC derivatives market. As of June 2014, the notional value for this market was $691 TRILLION.


This represents nearly 10 times global GDP. And we are talking about just derivatives here.


The biggest chunk of this is related to… interest rates… or bonds. All told, 81% or $563 trillion in notional value of derivatives trade based on interest rates. In the simplest of terms, if rates rise significantly, not only will entire countries go bust, but it will trigger a global systemic meltdown many multiples larger than 2008.


The Central Banks are trapped with ZIRP. This is why Bernanke said rates won’t normalize in his lifetime: any normalization means a crisis magnitudes larger than the 2008 crash.


That crisis WILL hit. Smart investors are preparing now.


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Best Regards

Phoenix Capital Research