Western financial system to collapse?

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Flanker2
Posts: 1729
Joined: 05 Dec 2012, 23:15

Western financial system to collapse?

Post by Flanker2 »

I'm looking at some indicators and I'm frankly starting to worry that financial systems of entire countries in the US and Europe may fail in a few quarters.

US Q2 GDP is projected to fall 39.5% YoY as of last Friday :https://www.frbatlanta.org/-/media/docu ... Slides.pdf

My personal estimate is about -40% published GDP, but -70% raw data for the US and Europe.

The problems governments in Western countries are facing are
-collapsing fiscal and other revenue
-increased spending because of PPP / unemployment program, healthcare costs of the pandemic
-huge potential future liabilities in uncollaterized loans, loan guarantees, deposit guarantee programs. If big banks and companies start failing, the government will have to write off loans, pay out loan guarantees to banks.

In this process, debt default is becoming more and more likely.
Europe and the US are already flooding markets with liquidity in order to cover deficits for all the above issues.
However, considering the risk of inflation, we may soon see government debt enter a spiral of increasing yields, leading to the collapse of government debt demand and ultimately, their respective currencies.

A glance at Venezuela is all it takes to realise what we may be headed for.

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