People have stopped saving for a rainy day and that's just when an economic crisis strikes
Households in the United States and the United Kingdom aren't putting as much money away for a rainy day and that could mean trouble.
Albert Edwards, a strategist at Societe Generale, pointed out in a note Thursday that saving rates in the both countries have steeply fallen recently. In the U.S., the household savings ratio has fallen to 3.8 percent on a net basis, it's lowest since the Great Recession, and to about 7 percent on a gross basis. In the UK, meanwhile, the savings ratio has slumped to 1.9 percent on a gross basis.
"This was last seen in 2007, just before the bursting debt bubble blew the global economy and financial system to smithereens," Edwards said, referring to the 2008 financial crisis.
We have been warning of a second great recession for several years on this site.
Our belief is it will be a crisis in government debt (the bond market) as interest rates rise into a stagnating economy. This leave central bankers in a quandary. They have not raised interest rates much as typically happens after a recession. So where will the ammunition come from when they want to "save" the economy? Yet another round of Quantitative Easing, that is, bond buying.
It is our belief that this will finally usher in new interest in precious metals and their stocks.
As the reader may recall, the bond market has about double the market capitalization of the stock market. So it may be reasonable to assume that the nature of the pending crisis will be about twice as bad as the 2008 great recession.