To The Moon

Over the course of the last 2 years, governments of the world had to pump in "money" to protect their economies from collapse. As a result, most countries are facing record-high inflation in recent times. Debt has been incurred as they raised the funds to battle Covid and save their economies. Debt to GDP ratio is a metric looked upon by analysts when coming to how countries were able to pay off their debt. Extract from VisualCapitalist: Global debt reached $226 trillion by the end of 2020, seeing the biggest one-year increase since World War II. Borrowing by governments accounted for slightly over half of the $28 trillion increase, bringing global public debt ratio to a record of 99% of GDP. As interest rates rise, IMF officials warn thathigher interest rates will diminish the impact of fiscal spending, and cause debt sustainability concerns to intensify. “The risks will be magnified if global interest rates rise faster than expected and growth falters,” the officials wrote. “A significant tightening of financial conditions would heighten the pressure on the most highly indebted governments, households, and firms. If the public and private sectors are forced to deleverage simultaneously, growth prospects will suffer.” In order to raise the money needed, governments (like the USA) resorted to printing money. On a monthly basis, the USA has pumped about $120 billion into the market through bonds and mortgage-backed securities (MBS). This caused an influx of disposable income that led to the inflation we are seeing now. With the Ukraine war, Russian sanctions, fuel, food and supply chain challenges have added to the complexities as the world seeks to recover from the Covid19 pandemic. We were expecting recovery and it was slow, to say the least. With countries like Sri Lanka entering bankruptcy, and Laos defaulting on their bonds, I fear civil unrest can take place. There are about 69 other countries that face fuel, food & financial insecurities as per reported recently by IMF (screenshot above). When bonds are sold, there is an expectation for the issuer to pay back with interest and eventually with capital as part of the natural process of a bond maturing. Sovereign funds and companies will buy over these with an expectation of returns. However, when bonds enter default, this debt could not be recovered in the agreed timely fashion. This will lead to companies and countries having a shortfall in their expected revenue. This can lead to a vicious cycle of taking up "leverage" to cover the shortfall. At some stage, such over-leverage can lead to a collapse of companies and even countries. On top of this, climate extremities have led to agricultural harvest shortfall. This is a time to exercise caution. With the Crypto market losing $2 trillion from its recent high of $3 trillion, we are expecting more companies to be affected, and margin calls to be made. The intent of this writing is to establish a realistic view of the challenges so that we are able to navigate through the choppy waters ahead. This is important that we do not leverage coming to investment. Let us spend within our means, invest what we can afford to lose and set aside "cash for crash". Research before investing in great companies at good discounts. @TigerStars $S&P 500(.SPX)$ $NASDAQ(.IXIC)$