Music was pumping as the clock hit midnight, cheers of Happy New Year then revelers played HighWay To Hell (ACDC), indeed it is all breaking as we enter 2023.
Even Generation Y and Z, the first generation who will live worse than their parents, have figured out that it is all breaking.
The greatest threat facing youth today is mental health problems, depression, and suicide. Society is breaking down, but take a deep breath, and relax, Big Pharma has a solution; legalize psychedelic drugs.
“Even Generation Y and Z, the first generation who will live worse than their parents, have figured out that it is all breaking”
WEALTH TRAINING COMPANY
Escaping from reality whether it be in the metaverse or with psychedelics could be a theme in 2023. There is a feeling of helpless doom, where the theme, which you have no say over, has been decided. It is like watching a bad movie or having a bad dream with the difference being that you have a role in this reality.
The last two years changed everything, pandemic, lockdowns, supply-chain problems, stagflation, and central bank tightening, which is currently breaking markets and economies.
And of course, not to mention the war in Eastern Europe where the proxy veneer has become so thin it no longer blurs reality; the US and its allies are at war with Russia.
It could be breaking in the literal sense; the risk of nuclear war has never been so high
On The Beach is a fictional movie about Australia being the only haven following WW3. But wind currents eventually condemned those on the continent to the same fate as the rest of the world. Human behavior changes when it becomes aware of its imminent mortality.
“The last two years changed everything, pandemic, lockdowns, supply-chain problems, stagflation, and central bank tightening, which is currently breaking markets and economies”
WEALTH TRAINING COMPANY
YOLO Spend until you drop
You only live once” (YOLO) means living life to the fullest, even when that means embracing adverse behavioral choices that carry an inherent risk becomes pronounced.
So the financial and economic implications of YOLO, investors take on more risks, and households consume more by going further into debt.
Household debt soars at the fastest pace in 15 years as credit card use surges, Fed report says.
The credit market is breaking; a tsunami of delinquencies and defaults comes next
We are going into 2023 with stress all credit markets skyrocketing.
It is not unusual to see stress in the credit market near the end of a booming credit cycle. But it is the magnitude that makes it different this time. Liquidity expansion has been so long that the quality of that debt deteriorating at the end of the credit business cycle is greater this time.
“Relative prosperity in Europe over the last few decades was in part due to trading with resource-rich Russia” – Wealth Training Company
So as the economic cycle heads down, a blowout in delinquencies and defaults plays out, and when there are too many, that triggers a financial crisis.
Some readers may recall that the crux of the 2008 financial crisis was a crisis with collateralized mortgage obligations.
Tight credit conditions also revealed malpractice as credit agencies rated subprime mortgages with top ratings.
Again we saw malpractice in 2022, the overleveraging of UK pension funds to meet current obligations.
Breaking energy, food commodity, fertilizer markets in Europe
Russian gas was a significant source of inexpensive energy for industrial Germany.
Relative prosperity in Europe over the last few decades was in part due to trading with resource-rich Russia. War in the eastern part of the continent is breaking the supply of vital energy and food commodities, which is in part contributing to shortages, higher prices, and inflation.
Here is the 800-pound gorilla; the ECB rate hikes in the face of 11.1% inflation will do nothing to address cost-push inflation shortages due to war on the continent, which has claimed 200,000 soldiers, 30,000 civilians, billions of euros in infrastructure damage, and millions of displaced people. Europe’s eastern battlefront, known as the meat grinder, is consuming human capital and resources, leading to shortages, which are all inflationary.
“Central banks will need to intervene to prevent another sovereign debt crisis” – Wealth Training Company
EU inflation is breaking EU bonds and the Euro
With the EU inflating at 11.1%, the entire European sovereign bond market is negatively yielding.
In other words, investors of peripheral EU sovereign bonds are losing more than 6% of their investments when factoring in inflation of 11.1%.
Put simply, the stars are aligning for another peripheral sovereign debt crisis, perhaps even worse than in 2013, bearing in mind that the debt problem is the worst since the lockdowns.
So with EU bonds, particularly in the peripherals, is deep in negative territory the only likely market for these bonds is the ECB which will be forced to buy the bonds. Other central banks could buy the bonds but why would they want to import Europe’s inflation?
But that also implies further dilution of the euro, creating a new euro currency crisis and hyperinflation. The ECB is in a debt trap and I do not see the Euro or the EU surviving in its current form unless the war ends and a trading relationship with Russia is restored. Even during the height of the cold war, Europe bought Russian gas and grain.
During the 2013 euro sovereign debt crisis, and bank bail-ins in Greece there was a black market in USD.
Breaking economies and YOLO risk on the rally
The great pivot of 2023 is inevitable. The Fed was forced to implement stealth bank bailouts in late 2022, a clear sign that the credit crunch is underway.
Central banks will need to intervene to prevent another sovereign debt crisis.
Stock Market history indicates that two consecutive down years are rare for major equity markets — the S&P 500 index has fallen for two straight years on just four occasions since 1928, and they usually marked market crashes or social cataclysms – the Great Depression, World War II, the 1970s oil crisis and the bursting of the dot-com bubble. But here is the killjoy for bulls; when they do occur, drops in the second year tend to be deeper than in the first. Investors already lost over 30 trillion USD in 2022, the biggest loss in a century, as Fed tightening pin burst the bubble of everything.
