When the Federal Reserve stepped in to save the day after the 2008 financial crisis, it cushioned the blow of the Great Recession with artificially low interest rates that made debt everyone’s new friend. People were reluctant at first, but now the world can’t get enough debt, and it’s starting to reach a tipping point.
The prolonged offering of practically free debt has loaded up not only corporate ledgers but household accounts too. At $217 trillion now, global debt continues to push the envelope of what’s possible while household debt in a number of leading countries has now hit record levels again, according to a recent ZeroHedge analysis by Mark O’Byrne.
“A sudden uptick in interest rates could not come at a more precarious time for global finances,” the article stated.
And yet that’s the direction that the world’s reserve banks are beginning to head. The Federal Reserve is moving interest rates up, and the Bank of England made its first upward move in the past decade.
In the meantime, the growth that has propelled the stock market to record highs hasn’t bolstered sizable economic productivity nor real wage growth for the everyday worker. Record-low interest rates have led to complacency and risk for individuals, investors, corporations and governments.
“There is a generation unprepared for an increase in the price of debt,” O’Byrne wrote.
Just like any addiction, once interest rates increase enough, the rising cost of credit will curb spending and send debtors into withdrawal. Because of the vast amounts of debt, any pain will magnified and readily apparent, and the trap will quickly be set, leaving those unprepared with few options besides eventual despair.
“Savers and investors alike need to begin to prepare their portfolios for interest rate rises against a backdrop of crisis-triggering debt levels and unproductive economies,” the article concluded.
The first step is obviously to ensure that any debt you may have has been eliminated or is fixed at a manageable rate – essentially immune to rising interest rates.
Then make sure your retirement portfolio is protected against any deterioration in the markets. The currently prevailing consumer and investor confidence may stretch on for months yet, but all that debt will likely catch up with us eventually. With the price of gold near its lowest level this fall and major institutions making preparations to hedge their portfolios with gold, now is a great opportunity to diversify with physical bullion or coins that you can even own in a precious metals IRA account.
Orion Metal Exchange is America’s fastest-growing retail precious metals firm, specializing in physical gold, silver and platinum investments. Its Express Gold IRA program is set up to provide a quick and reliable method for adding gold, silver and platinum to retirement accounts in the form of a self-directed IRA. For more information and a FREE guide, visit, www.orionmetalexchange.com .