When It Comes

When the Recession comes, it won’t be because any US president (Trump or the next Dem president) does or doesn’t do something. It’s not about that at all.

This is how (the currently existing form of) capitalism works. The economy overheats, bubbles form, bubbles pop, a crash occurs. The bubble that is growing the most in this cycle is in the area of business capitalization. Corporate debt isn’t getting deleveraged. Which means the bubble will pop. The problem is very bad in Europe, China, and the US.

To explain this in very simple terms, remember the last recession? People borrowed money they could never repay to take out mortgages on houses that were grossly overpriced. That unhealthy situation created all sorts of miasma in the finance industry, and we all know what happened after that. Right now, the same thing is happening with corporate borrowing.

I understand the need to believe that there is an all-powerful, big daddy who’s responsible for absolutely everything, who makes every boo-boo and can make every boo-boo go away. But that daddy doesn’t exist.

The global economy is cyclical. Bubbles will form, bubbles will pop. All we can do is stop fantasizing about the omnipotent big daddy and make sure our personal financial situation will withstand the storm. Good news: it probably won’t be as bad as 2009 because crowds of people won’t get evicted and the debt isn’t held by Bank of America and Chase.

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