BLACKSTONE STOCK DOWN 43% LAST YEAR
DEBT CRISIS COMING
by DAVID K. LIFSCHULTZ
COMPLEMENTS OF THE LIFSCHULTZ ORGANIZATION SINCE 1899
This Roubeni analysis below is correct. There is a variable rate shock coming in the major real estate markets where many of the players took on variable rate mortgages on buildings for their low rates and now cannot refinance at the higher rates as the mortgages come due. It can jeopardize their entire company. Even if they do not come due they cannot absorb the higher rates based on the variable rate nature of their mortgages.
Adjustable-rate mortgages (ARMs), also known as variable-rate mortgages, have an interest rate that may change periodically depending on changes in a corresponding financial index that’s associated with the loan. Generally speaking, your monthly payment will increase or decrease if the index rate goes up or down.
This ties in with the Blackstone problem in footnote one. Exposures such as this contributed to the 2008 debt crisis which let to a 29 trillion dollar bailout. How this 29 trillion bailout is broken down is explained in the next link.
Let’s understand this 29 trillion dollar figure by some points of reference. The total national debt today is 31.46 trillion dollars. In 2008 is was merely 10.3 trillion only ten times its 1980 level. I think the reader can see a trend here as in Weimar Germany.
The national debt ($31.46 Trillion) is the total amount of outstanding borrowing by the U.S. Federal Government accumulated over the nation’s history. Updated daily from the Debt to the Penny dataset.
The debt shrank briefly after the end of the Cold War, but by the end of FY 2008, the gross national debt had reached $10.3 trillion, about 10 times its 1980 level.
Worst-ever economic crash coming – Nouriel Roubini
3 Mar, 2023 13:52
The great stagflationary debt crisis will hit markets this year, the famed economist warns Worst-ever economic crash coming – Nouriel Roubini
The world is facing the “perfect storm” of high inflation, rising interest rates and a recession in 2023, with people who are currently employed likely to be hit hardest by the crisis, famed economist and New York University professor Nouriel Roubini told Australia’s ABC on Thursday.
One of the first economists to predict the financial crisis of 2008-09, Roubini has been warning now for months of a stagflationary debt crisis, which would combine the worst elements of 1970s stagflation and the 2008 debt crisis.
“I do believe that a stagflationary crisis is going to emerge this year,” he said, pointing out that the debt ratio in advanced economies was only 100% of GDP in the 1970s while currently it is 420% of GDP, in private and public debt.
“So, in this case, if we have those shocks to, say, oil prices, not only do you get inflation, not only do you get recession and stagflation, but you get what I call a great stagflationary debt crisis, because with interest rates so high, then that [debt] ratio has become unsustainable,” he explained.
Dubbed ‘Doctor Doom’ by Wall Street for his dire economic predictions, Roubini suggested that all of this would force the US Federal Reserve and other central banks to keep hiking interest rates until their economies fell into recession.
“I think that the Fed funds rate will have to be certainly above 6% to achieve a 2% inflation target,” he said. “But if you raise interest rates to 6% then you’re going to have a real hard landing.”
Recession coming to major Western economies – Fitch
Read more Recession coming to major Western economies – Fitch
According to the economist, this will precipitate a harsh correction in equity markets, bond yields going higher, credit spreads for private sector debt widening, and will eventually lead to severe financial distress.
“That financial distress is going to make the recession more severe, and a more severe recession by having a contraction of income and output is going to increase the number of defaults by households, businesses, corporates, and even some financial institutions and some governments in poor countries that have serious debt problems,” Roubini warned.
He also said that people who are currently employed would likely be hit hardest by the looming crisis, including those who kept their jobs. “Stagflation is the worst of all worlds for workers,” he stressed.
See two links for further info:
https://www.zerohedge.com/markets/commercial-property-angst-rises-blackstone-limits-redemptions
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