With the Dow plunging more than 350 points, today a 50-year market veteran warned King World News that the global debt crisis will increase worldwide panic as historic super-bubbles begin to burst.
John Embry: “It was certainly an interesting opening week of 2016. That was probably as bad a week as the U.S. stock market has ever experienced. And that doesn’t portend good things for the rest of the year because historically the market has tended to follow the trend established in the first week…
“And it will follow the downward trend for good reason. The market is grotesquely overvalued, the technical condition is terrible, and the fundamentals are deteriorating by the day.
The bogus jobs numbers reported by the BLS last Friday demonstrates the extent of the problems the U.S. authorities are dealing with. To have to lie that overtly to the public is instructive. In reality there were next to no jobs created. Thus, the Plunge Protection Team will have its hands full trying to keep the stock market elevated. But they will try, just as the Chinese, Japanese and Swiss authorities, just to name three, have been doing ad-nauseam.
The problem is that there is infinitely too much global debt. The system, as you know, Eric, almost collapsed in the financial crisis of 2008, but the antidote was a global QE, which has increased world debt by roughly 50 percent, or $70 trillion in a mere 7 years.
Zero interest rates, unrestrained money creation, questionable accounting and constant government interference in markets, has kept things afloat to date. But the most dramatic outcome has been historic bubbles in virtually all asset classes. Those in oil and financial commodities have burst, but still to come are bonds, stocks, and real estate. This can be delayed if the authorities are prepared to underwrite a global hyperinflation, but that will ensure an ever worse denouement.
Changing subjects, I had the pleasure of seeing the movie The Big Short over the weekend. Very seldom does a great book translate well to the big screen, but in this case it did so in spades. It revealed the cesspool that the American financial scene has become, and yet it did it in a way that even a financial novice could appreciate. It also got me thinking about how little things have changed. Wall Street continues its abhorrent ways, while the vast majority of the public sees their living standards slowly implode.
Three segments of debt that have grown rapidly in the U.S. over the last 7 years are student loans, junk debt to finance the massive boom in the fracking business, and sub-prime car loans. Each category is now in excess of $1 trillion and all are in some form of difficulty. So when the next debt crisis hits, and I expect it to be soon, the central banks will be found to be out of ammunition with the exception of unrestrained money creation. But that isn’t a real solution as it will just bring things rapidly to a worse crisis.
The only three undervalued assets today are gold, silver and their respective equities. They do exceptionally well during either a deflationary debt spiral or mounting inflation. We are soon going to be confronted with one or the other, so exposure to these asset classes remains absolutely essential at this time.” 
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