Since 2007 global debt has risen by $57t, or about 3 times faster than inflation. The biggest increase was in home mortgages.  The Economist magazine (Feb. 7/15) says 10 countries have debt ratios of more than 300% of GDP.  This will prove to be a huge burden for these governments moving forward.

Nobody talks about all the money that is wasted on interest charges from passed outstanding debt.  In the case of the U.S., USdebtclock.org estimates it has paid $2.567t, or $8,012 per citizen.  Sadly, almost all national borrowing is used to keep government’s alive rather than building wealth.

The Baltic Dry Index, which measures the cost of shipping, has set 40 year record lows almost every trading day since the first of the year.  This signals that world trade is falling off a cliff.  Either no one notices or nobody cares.

Stock markets are outperforming their country’s growth.  Interest rates are generally around 1%, yet few people want 4% dividend paying shares (banks, utilities, pipelines).   For Canadians who qualify for the Canadian Dividend Tax Credit the yield is close to 5%.  If income was important to people those 4% dividend shares today would trade closer to a 2.5 to 3% yield (share price would be higher).

Today, we are experiencing the longest period (86 years) between depressions.  We could be overdue for a major correction.  There is nothing the politicians and Central Bankers can do to stop it once it begins.  They can only delay the action by a few weeks or months.

These are confusing times.  This means you must protect you wealth.  Investors should eliminate all debt and build up cash reserves.  In periods of deflation cash is the number one asset to hold.  After that come hard assets like farm land and blue chip securities.

We seem to be the only ones who think this, but when interest rates start to rise they will climb faster than anyone expects.  We can see 10% early next decade.  The world is awash in currency especially the U.S. dollar.  Deflation has had a nasty habit of wiping out currency causing a sudden shortage of cash.  As a result, demand for money rises and so does the price of it.  Do not take any unnecessary risk with your savings.