Is another financial meltdown coming? The answer is no. Here is why.

In a well-researched article, the idea of a financial meltdown is dispelled:

https://seekingalpha.com/article/4209026-another-financial-crisis-coming-investors-need-know?lift_email_rec=false

This author concludes that the conditions that precipitated the last meltdown (i.e. in 2008) do not exist. The last meltdown was caused basically by two thing: 1. subprime mortgages and 2. securitizing those subprime mortgages. As those mortgages became delinquent, the derivatives based on those mortgages lost their value. In fact, the banks who securitized the mortgages issued derivatives that were levereged 30 times the value of the mortgages. So, for every million loss in NINJA loans, 30 million loss occured in the value of the securities. Worse, the suspect loans were bundled in with good loans, so it was very difficult to isolate the problem.

Supposedly, the NINJA loans have been cut back and are no longer securitized.

There is one other reason why a meltdown is not likely. Total debt in the US rose 4.9% in the 10 years since the meltdown. But, population has increased 8.1% while the economy has grown by 39%. Thus, the debt is spread over a larger population that has more resources to pay.

Still, there are warning signs. The meltdown of currencies of peripheral states and their indebtedness will eventually spread because they act like the securitized mortgages did. The plight of these countries is exacerbated by the manipulation of the US Dollar to increase in value. As the peripheral nations have to pay off their loans in US Dollars, the problem is obvious. This problem could be solved if commodities increased in value, but the FED and the BIS keep commodity prices depressed by keeping the value of gold artificially low.

Financial advisor Ricards maintains that the Administration will eventually solve this problem by resetting the value of gold to maybe 10,000 dollars/oz but now it will not happen till after the election. Would such a revaluation cause inflation? Maybe, maybe not. We will revisit this topic at another time.