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Once you allow your economy to become dependent on extremes of debt, leverage, inequality, legalized looting, monopoly, pay-to-play politics and speculative asset bubbles, a depression is inevitable.
All the linked frailties and dependencies of our economy are like lines of dominoes: one default topples the entire line of dominoes of debt, leverage, derivatives, counterparty risk, credit default swaps and most devastating of all, any certainty that borrowers won’t default in the future.
The pandemic lockdown will be blamed for the Greater Depression, but the lockdown only toppled all the dominoes that were already lined up.
…We’re in the eye of the hurricane right now, as everyone holds their breath and hopes some sort of magic will make all the debt that has to be serviced every month vanish…[but] every dollar of debt is someone else’s asset and the source of their income so when the defaults and bankruptcies sweep through the financial system, they’ll obliterate all the “wealth” of those holding bundled student and auto loan securities, mortgage backed securities, corporate bonds, and destroy the income streams these trillions in debt generated.
Editor’s Note: The original article by Charles Hugh Smith has been edited ([ ]) and abridged (…) above for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor. Also note that this complete paragraph must be included in any re-posting to avoid copyright infringement.
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