This credit quality deterioration then impacts markets by adding another anchor around the necks of global debt, equity, and commodity markets. Of course it takes some time for that anchor to be felt mainly because we live on a planet where there is very little understanding of Economics 101 by those who invest in these financial marketplaces.
The secondary problem is that government regulators also have very little understanding of Economics 101. In other words, political expediency always defeats fiscal discipline.
The problem is that all government regulators in all governments are not professionals at what they are attempting to regulate. They are instead mostly political appointees.
Why this is dangerous is because it drives up credit quality deterioration and increases interest costs of all governments and corporations as a percentage of GDP. That's why a Global Grey Skies Policy is necessary now -- while it's still doable.
All nations are gradually moving in that direction as central banks are cutting their respective benchmark interest rates to a so-called "real" negative number. That is the first step in the establishment of a Grey Skies Policy. They are doing it knowingly, responding to the declining GDPs of their own nation-states.
The problem is that this is not being done on a coordinated time table like it should be done, thus reducing the beneficial effects of a Grey Skies Policy by delaying its enactment and not coordinating it globally -- as central banks have done before.
What's needed is a Global Grey Skies Policy, wherein a global GDP of 1.5% per annum can be maintained through the application of negative interest rates and endless liquidity.
The problem is that as credit quality deteriorates, which is a phenomenon that exists at the governmental, corporate, and individual level, interest rates are forced higher while debt service consumes an ever greater portion of GDP.
Now governmental and corporate debt service cost is consuming 1% of global GDP. So if you say weâre going to maintain a 1.5% global GDP under a Grey Skies Policy, the first 1% of that isn't being used for any effective purpose to promote economic growth. It is simply being used to service existing governmental and corporate debt.
Meanwhile people ask me why the global criminality of banks and other financial institutions is never addressed. My answer is -- nor will it ever be.
In other words, why talk about it, when it will never be addressed? And where will all the monies that were looted end up? It will benefit those whom it was meant to benefit.
The concentration of wealth will provide the necessary power for a ruling elite to be maintained in a post-economically collapsed environment, wherein a ruling elite needs substantially more power than it would have otherwise.
For the rest of this exclusive column by independent market analyst Al Martin, click on to Al Martin Raw.
* AL MARTIN, author of "The Conspirators: Secrets of an Iran Contra Insider," is an Independent Political-Economic Analyst with 25 years of experience as a trader on NYMEX, CME, CBOT and CFTC. He is also currently trading the commodity futures market day and night and has a teleconferencing service to facilitate transactions in the markets. This is a service for independent market-experienced traders.
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