Suppose

A long time ago in our nation’s history, 1929, 98% of the people thought the stock market would continue to go up, up, up. Unlike today only a small % of Americans owned stocks. Most of those were borrowing up to a 90% margin, i.e. 10% down and pay off the rest when the stock went up. A panic began. No one was sure what caused the panic, but stocks crashed and the dollar not only dropped, it almost disappeared because no one had any, NADA!

Thus began a national depression that really didn’t end until the middle of World War II, and even then it was none too robust. Economists at that time, at least those that had champions in Congress, decreed the way to prevent depressions was to borrow to the hilt, cheapen the dollar so plenty were around, and build a strong central government in DC so the national economy could be “managed.”

Today the US has borrowed so much over the years[expenditures exceed income, e.g. taxes] the government must borrow, i.e. sell bonds, which raises the interest rate. This eventually causes not only inflation but a strain on the economy. Which is where we are today.

Personal debt in the US is at an all-time high. A spending frenzy has occurred in the last few years due to housing inflation, where homeowners have found they can borrow on their home equity and pay back when they sell the house at an increased price. A very temporary boost in discretionary spending happened and borrowers used the new found wealth to buy all sorts of necessary things, like autos, second homes, vacations, all kinds of electronic and communications gadgets, etc., etc.

Chickens have come home to roost and the price will be paid soon with increasing inflation and a drop in discretionary spending, causing business activity to fall. The big government boys in DC will respond with ever cheaper money only making inflation worse and the stock market will respond with an 1987 kind of pull back in the value of equities. This time the drop may last a lot longer and many investors will be butchered and many wage earners will struggle.

Batten down the hatches as best you can.

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