The three big economic waves about to hit the globe and how to surf them

According to macroeconomic expert Roger James Hamilton there are three big economic waves that are about to hit the global economy now during the pandemic and lockdown. Currently we are in the first wave, called The Great Global Give-away, which will last for a few months this year. It is the situation where the banks and government are giving away money to the needy to prop up the collapsing economy. The standstill of trade and industry has brought us all to a halt and so massive QE by the Fed as well as helicopter money for the individual businesses and people in desperation, is being given out by the billions of dollars. This is a delicate situation that is of course unsustainable and these bailout packages will come to an end at some point soon. Consumer debt is already at $47 trillion in USA for example, where most of the free money is being given out.

Once consumer debt becomes unpayable simply because the consumer like you and I no longer have the income to continue paying off loans, then we will see defaults. That then leads to the next step, namely corporate defaults, where entire corporations are unable to continue paying their bank loans. Corporate debt is around $66 trillion, which is double what it was at the 2008 Global Financial Recession. At present such debt makes up 78% of USA GDP. Already defaults on loans are at 20%, after almost 4 months under lockdown of some sort or the other. Naturally collapses will occur sector by sector, with the service industries being hit particularly hard. Hospitality, restaurants, travel and hotels are all worst hit and will be going bankrupt already. The oil industry may follow in time, unless demand returns, which is possible so the situation is very fluid at present.

What is expected as a result of all of this is The Sale of the Century, where all these bankrupted and indebted companies want to sell, and they will go for pennies on the dollar. It happens at each cyclic financial collapse, as in 2008 for example, and at the dot com collapse in 2000. This is how what I like to call the “trickle up” economy works. The rich are then able to scoop up all these failed companies and assets really cheaply with their reserves of money while the middle class and workers become destitute.

The third wave arrives when we start seeing sovereign debt defaults. This is when the government itself, which has been holding everything up with QE then also can not handle the strain and also begins wavering. The current money printing and distribution can only carry on for a few more months. And when the government subsidies that were keeping the corporations afloat all start to dry up, and the government itself can no longer sustain its capital requirements, then we will potentially see even the government departments themselves start to run dry.

This may not be so evident in first world nations with their Fed and QE, but in my country South Africa, as well as some other emerging economies, we could see serious defaults of loans to the IMF and World Bank, as well as China bank. Africa may well lead the collapse of sovereign independence because when we take on further debt from the IMF or China, they will effectively own us. Already they have one arm around our mineral assets. With any further loans to us their other arm will come in and they will be able to scoop up any assets that they desire from our rich mineral reserves, as well as agricultural bounty.

We have been declared Junk Status b Moodys and other rating agencies, which means international investors are highly discouraged from investing in our nation. I wonder what will happen when both the IMF of the west and the China bank both want to claim our wealth in minerals when we default again? Perhaps the showdown for global dominance will also play out in Africa, as we are pulled between east and west, being right in the middle of both.

Now global debt currently sits at around $275. The USA national debt is $23 trillion, almost 10% of global. It was only $9 trillion in 2008. If this does not dissuade you from thinking that the system is fixable, then nothing will. Under these condition the debt can never be repaid, and some form of debt jubilee is one of the only solutions. Simply forgive all debt. It has been done before and used to be a regular thing in previous ages and civilizations, where the king would erase debts at a certain point in the calendar, perhaps every few years. Another option is to let the current global financial system implode and then to build a new one from the ashes. It looks like that is where we are now, but it’s still very uncertain.

One thing that is certain though, is that we in Africa are experiencing the highest amount of capital flight from our shores in modern history. And this actually includes all emerging markets, like Middle East and South America. It even includes nations like Italy and Spain. We are all struggling to get yet another loan or bailout because we were never able to repay the last ones, and obviously won’t pay back any further loans. Argentina is a classic and well known serial defaulter, doing it again today. We will all be following suit here in the third world.

According to these macroeconomic experts, 2021 will be the year of nations collapsing, following on from the earlier two waves of personal and corporate debt defaults. The IMF has just reported that 80% of countries on the planet are asking for help in the form of loans and bailouts form them. Obviously they can’t service all of us. Is this therefore the end of this system as we have known it? Certainly a total restructuring of our global monetary system will happen in the coming decade. We are at a historic cusp.

The solutions going forward include safe investment havens like Singapore, and others, not UK or USA or Australia. Add to that a “purpose over profit” mentality that has to emerge, where we pursue and invest in education on a national level, including entrepreneurial colleges. I personally believe in educating as many people as I can in cryptocurrency and bitcoin, whether trading or long term investing. This is the new tech industry and whoever jumps on board can benefit. Remember that the stock markets crashed 20% during the initial March 2020 pandemic lockdown. Generally in the past we have seen that the average recovery after such a collapse is usually around 1000 days or about three years, so we have a way to go still before we are out of the current headwinds i the global financial storm. However, those of us online can take this opportunity to educate ourselves about the new emerging digital currency systems, as well as earning online and from home. In this way we can weather the storm and learn new skills to keep ourselves afloat in the new economy arriving now after the third wave. I wish us all well in the rebirth.

(image pixabay)