{"id":789,"date":"2023-05-31T12:00:11","date_gmt":"2023-05-31T12:00:11","guid":{"rendered":"https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/?p=789"},"modified":"2025-05-15T15:00:10","modified_gmt":"2025-05-15T15:00:10","slug":"tackling-debt-and-global-financial-challenges","status":"publish","type":"post","link":"https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/tackling-debt-and-global-financial-challenges\/","title":{"rendered":"Good News! Lion Tamer: Tackling Debt and Global Financial Challenges"},"content":{"rendered":"<h2><span style=\"font-size: 14pt\">Uri and Irene&#8217;s Debt Struggles<\/span><\/h2>\n<p>Meet Uri and Irene, a young couple\u00a0wrestling with a mountain of debt. They owe $308,000 on their home, with $60,000 needing urgent refinancing at an alarmingly higher interest rate than they are currently paying. Add a hefty $20,000 for essential home repairs that will have to be added to their debt, and their financial picture, unlike their portrait, is daunting.<\/p>\n<p><img fetchpriority=\"high\" decoding=\"async\" class=\"alignnone size-full wp-image-791\" src=\"https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/Uri-Irene-and-Leo-the-Lion.jpg\" alt=\"Uri, Irene and Leo the Lion\" width=\"800\" height=\"686\" srcset=\"https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/Uri-Irene-and-Leo-the-Lion.jpg 800w, https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/Uri-Irene-and-Leo-the-Lion-300x257.jpg 300w, https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/Uri-Irene-and-Leo-the-Lion-768x659.jpg 768w\" sizes=\"(max-width: 800px) 100vw, 800px\" \/><\/p>\n<p>Uri, Irene and Leo the Lion<\/p>\n<p>This couple, despite earning $104,000 a year, find themselves in a dilemma.\u00a0 Higher interest payments will eat away 3% more of their income. In layman&#8217;s terms, unless their income grows by at least 3%, they&#8217;ll have less and less to live on and may have to borrow just to make the interest payments. They&#8217;re stuck in a debt spiral of endless borrowing just to keep up with their debt.\u00a0 There&#8217;s a term for people in the situation Uri and Irene find themselves &#8211; broke!<\/p>\n<h2><span style=\"font-size: 14pt\">The Global Debt Crisis<\/span><\/h2>\n<p>Here&#8217;s the surprising twist: Uri and Irene aren&#8217;t just two people. &#8220;U&#8221; and &#8220;I&#8221; stand for all of us, I&#8217;ve used them to\u00a0illustrate the\u00a0global debt crisis. If we replace &#8220;thousand&#8221; with &#8220;trillion&#8221; and &#8220;annual income&#8221; with &#8220;GDP,&#8221; the total value of goods and services produced in a year, you&#8217;ll understand the global debt situation the world faces.\u00a0 Here&#8217;s the breakdown:<\/p>\n<p><img decoding=\"async\" class=\"size-full wp-image-792 aligncenter\" src=\"https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/global-debt-leverage-is-a-great-reset-coming.jpg\" alt=\"global-debt-leverage-is-a-great-reset-coming\" width=\"378\" height=\"281\" srcset=\"https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/global-debt-leverage-is-a-great-reset-coming.jpg 378w, https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/global-debt-leverage-is-a-great-reset-coming-300x223.jpg 300w\" sizes=\"(max-width: 378px) 100vw, 378px\" \/><\/p>\n<p style=\"text-align: center\"><a href=\"https:\/\/www.spglobal.com\/en\/research-insights\/featured\/special-editorial\/look-forward\/global-debt-leverage-is-a-great-reset-coming\">source<\/a><\/p>\n<p>The global economy needs to grow by more than 3% just to keep up with the increased interest costs on the debt. But the forecast is gloomy: growth of a mere 1.7% next year. The shortfall will have to be borrowed &#8211; just to pay the interest!<\/p>\n<p>Countries could be sucked into a debt spiral, forced to borrow more just to meet interest payments. This isn&#8217;t just a problem for developing countries.\u00a0 Canada has a massive combined government and household debt.\u00a0 We were recently ranked number one for household debt per capita among G7countries &#8211; <a href=\"https:\/\/www.ctvnews.ca\/business\/canada-has-highest-household-debt-level-in-g7-cmhc-deputy-chief-economist-1.6410137\">source<\/a>. Even more worrying is that Canada&#8217;s income growth rate is the slowest among the 39 nations of the OECD &#8211; <a href=\"https:\/\/www.theglobeandmail.com\/business\/commentary\/article-why-canadas-economic-growth-is-expected-to-be-dead-last-among-advanced\/#:~:text=The%20OECD%20also%20sees%20Canada,incomes%20over%20their%20working%20lives\">source<\/a>.<\/p>\n<h2><span style=\"font-size: 14pt\">Liquidity and Investment Opportunities<\/span><\/h2>\n<p>Economic reality is as relentless as a lion and harder to tame. If interest rates climb or even just stay high, interest costs on global debt will swell faster than our economy can grow, and we&#8217;re headed for a debt spiral. The warning signs are there, like the recent banking crisis in the U.S.\u00a0 Our central bankers, having been complicit in creating this mess, now have to try to act as lion tamers to get us out of it.<\/p>\n<p><img decoding=\"async\" class=\"alignnone size-full wp-image-793\" src=\"https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/Jerome-Powell-Lion-Whisperer.jpg\" alt=\"Jerome Powell - Lion Whisperer\" width=\"800\" height=\"725\" srcset=\"https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/Jerome-Powell-Lion-Whisperer.jpg 800w, https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/Jerome-Powell-Lion-Whisperer-300x272.jpg 300w, https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/Jerome-Powell-Lion-Whisperer-768x696.jpg 768w\" sizes=\"(max-width: 800px) 100vw, 800px\" \/><\/p>\n<p>Jerome Powell &#8211; Lion Whisperer<\/p>\n<p>Yet, there&#8217;s hope for investors. That battle with inflation may be ending (if not the war).\u00a0 After raising rates and tightening liquidity in recent years, central banks are reopening the liquidity tap. In economic terms, &#8216;liquidity&#8217; refers to the extent to which assets can be quickly bought or sold in the market without affecting the asset&#8217;s price. Essentially, it&#8217;s the lifeblood of the economy, ensuring money flows smoothly and since 2022 liquidity has been drained to combat inflation.\u00a0 Less liquidity has generally resulted in lower stock prices as the chart below shows. So this renewed provision of liquidity could signal the end of the rising interest rate cycle and provide a boost to markets.<\/p>\n<p>The world needs to refinance &#8211; or restructure &#8211; a staggering $60 trillion in debt and increase it by $20 trillion. If there is insufficient liquidity to\u00a0handle this, we&#8217;re looking at serious trouble. A lifeline comes from central banks pumping in liquidity, or easily accessible funds.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-794 aligncenter\" src=\"https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/central-bank-liquidity.jpg\" alt=\"central bank liquidity\" width=\"800\" height=\"291\" srcset=\"https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/central-bank-liquidity.jpg 800w, https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/central-bank-liquidity-300x109.jpg 300w, https:\/\/advisor.wellington-altus.ca\/evansfamilywealth\/wp-content\/uploads\/sites\/205\/2024\/05\/central-bank-liquidity-768x279.jpg 768w\" sizes=\"(max-width: 800px) 100vw, 800px\" \/><\/p>\n<p>Recent signals show an uptick in liquidity, a ray of hope for investors. With the Federal Reserve moving to boost liquidity, technology stocks are shining. Veteran economist Michael Howell, an expert on liquidity and author of &#8220;Capital Wars: The Rise of Global Liquidity&#8221;, pinpoints three potential hotspots for investment: Gold (and gold stocks), stocks (especially tech), and surprisingly, cryptocurrencies like Bitcoin. (source:\u00a0<a href=\"https:\/\/investresolve.com\/podcasts\/resolve-riffs-with-michael-howell-on-liquidity-its-multi-dimensional-impacts-on-markets-and-the-economy\/\">https:\/\/investresolve.com\/podcasts\/resolve-riffs-with-michael-howell-on-liquidity-its-multi-dimensional-impacts-on-markets-and-the-economy\/<\/a>)\u00a0 I&#8217;m not sure I agree with all of his conclusions, but his analysis seems spot-on.<\/p>\n<p>The Good News is that even in the face of banking crises and potential recession, hope remains. The tech, gold, and crypto sectors are showing signs of resilience, buoyed by shifting liquidity conditions.<\/p>\n<p>If this positive trend persists, we might soon witness the end of this challenging interest rate cycle. Like our fictional friends Uri and Irene, we&#8217;re all on a financial\u00a0journey, it&#8217;s like a road trip across Canada. We&#8217;ve been driving through thunderstorms on the prairies, soon we&#8217;ll see the\u00a0Rockies on the horizon.\u00a0 Yes, there are still risks ahead &#8211; chiefly recession risk &#8211; but the increase in liquidity is an encouraging indicator and the performance of some sectors are a strong reminder that there are always opportunities.<\/p>\n<p>Glen<\/p>\n<p>ps\u00a0Sharp-eyed readers may be wondering how increased liquidity solves the debt crisis?\u00a0 Sadly doesn&#8217;t, but it allows the debts to be rolled and funded and maintains orderly markets. We&#8217;ll discuss the ways the debt might be resolved another time.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Meet Uri and Irene, a young couple\u00a0wrestling with a mountain of debt. They owe $308,000 on their home, with $60,000 needing urgent refinancing at an alarmingly higher interest rate than they are currently paying. Add a hefty $20,000 for essential home repairs that will have to be added to their debt, and their financial picture, unlike their portrait, is daunting.<\/p>\n","protected":false},"author":193,"featured_media":791,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_oasis_is_in_workflow":0,"_oasis_original":0,"_oasis_task_priority":"","footnotes":""},"categories":[93],"tags":[399,400,404,53,394],"class_list":["post-789","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-market-insights-news","tag-crypto-blockchain","tag-global-markets","tag-government-policy-economic-impact","tag-inflation","tag-technology-innovation"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Tackling Debt and Global Financial Challenges - Evans Family Wealth<\/title>\n<meta name=\"description\" content=\"Discover how global debt and economic challenges mirror individual financial struggles. 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