Around the world, debt is skyrocketing – and rising interest rates are making it unsustainable. In this first part, Ben Norton discusses the impending crisis in the United States, before explaining in part two how Wall Street traps the Global South in debt.


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the world is on the verge of a massive

debt crisis with unsustainable debt

levels and defaults and delinquencies on

debt at the highest level since the 2008

financial crash this huge debt crisis is

something that is not only affecting

rich countries in the west like the

United States and numerous European

countries but in particular many

countries in the global South are facing

serious debt crises and this is really

the product of a perfect storm with

inflation and Rising interest rates with

supply chain shocks coming out of the

pandemic with Western sanctions with the

geopolitical conflicts and the new cold

war that the United States is waging

against China and Russia all of these

factors have come together in a

disastrous toxic mix that could lead to

very serious economic problems in the

near future this video that I’m doing

here is actually going to be in two

parts because I don’t want to make it

super long like an hour instead I’m

going to focus in the first part on the

major debt crises in the United States

with very rapidly Rising defaults and

delinquencies on credit card debt on

auto loans and the massive crisis in the

U.S commercial real estate market which

could potentially threaten the stability

of the U.S financial system itself and

in the second part of this video I’m

going to be looking at a report that was

done by economists warning about the

debt crises in the global South and the

parallels that these debt crises have to

the debt crises of the 1980s which were

linked to many neocolonial policies and

the international monetary fund in the

world bank and it has a lot to do with

geopolitics as well but again that is

going to be in a second video in the

first part here I’m going to be looking

at the situation in the United States

one of the most concerning signs of an

impending debt crisis in the United

States is that the number of North

Americans who are falling behind on

paying their credit card debt and auto

loans is at the highest level since the

aftermath of the 2008 financial crash

The Washington Post warned about this in

a report titled delinquencies rise for

credit cards and auto loans and it could

get worse it notes that more Americans

are falling behind in their car loans

and credit card payments that at any

time in more than a decade and more and

more people are deciding whether to pay

their credit card bills or their rent or

to buy groceries so having to choose

between your house and your food

and furthermore the article notes that

there are signs that the hardship for

millions of consumers will get worse

before it improves the average credit

card interest rate which is already at a

record high of 20.6 percent is going to

continue to keep climbing I want to

repeat that that is a shockingly high

number nearly 21

is the average credit card interest rate

in the United States that is exorbitant

that’s that’s those are loan shark rates

and furthermore student loan payments

that were previously paused for more

than three years due to the pandemic are

going to resume in October so this is

really a perfect storm for a debt crisis

now a big reason for this is because the

U.S federal reserve the U.S Central Bank

has been aggressively raising interest

rates ostensibly in order to bring down

Consumer Price inflation Nation although

in reality the chair of the Federal

Reserve Jerome Powell admitted that the

goal is to drop wages to bring down

wages so to smash the power of Labor so

Capital can discipline labor because

workers are always blamed for inflation

despite the fact that the Consumer Price

Index inflation we’ve seen in the past

few years were was mostly due to the

supplied shocks the shocks of the supply

chain due to the pandemic and the

lockdowns furthermore the war in Ukraine

and the Western sanctions on Russia and

Russia is of course one of the world’s

leading producers of oil and gas and

wheat and fertilizer so commodity prices

Rose a lot

because because of the war because of

the supply chain shocks in in the

lockdowns and as commodity prices go up

especially as the price of oil goes up

that tends to lead to an increase in

Consumer Price inflation

and especially considering that you need

oil to transport the goods that you’re

buying at the store so if the price of

oil goes up naturally the price of those

goods tends to go up as well so blaming

labor of course is what the FED always

does to try to justify attacking labor

and dropping their wages but this

article in the Washington Post points

out that the pain in the U.S economy

with more and more people unable to pay

their debt this pain is an indication to

Fed policy makers that their push to

tame inflation is working so they

consider this to be a good thing

they consider it good that more and more

North Americans are unable to pay off

their debt The Washington Post points

out that there are now actually 70

million more credit card accounts open

than there were in 2019 and Americans

total credit card debt has topped one

trillion dollars for the first time

along with the roughly two trillion

dollars in student loans

furthermore Shoppers are now turning to

buy now pay later services to cover

Necessities such as groceries because

the price of food has been rising so

instead they’re taking debt to pay for

food usage of this kind of debt to pay

for food has surged by 40 percent just

in the first two months of 2023.

and the Washington Post actually points

out there’s a funny little note here

they note that uh Amazon founder Jeff

Bezos owns the Washington Post and the

interim CEO of the Washington post Patty

stonecipher sits on Amazon’s board and

she was also the founding CEO of the

Gates Foundation so it’s you know it’s

it’s all known old boys club and you

know you’re not a member but this points

out that Americans are continuing to

trim discretionary spending and in fact

there has been a decrease in the

spending at physical you know mortar and

brick stores but there actually has been

an increase in spending online largely

at Amazon and that’s why they pointed

out that you know the Washington Post is

owned by this billionaire oligarch but

the point is that this article notes

that credit card delinquencies will

continue to rise in the second half of

2023 on top of rising interest rates and

student loan repayments higher energy

and electricity bills will also add to

Consumers debt loads and then finally I

haven’t even talked about auto loan

payments this article notes that

delinquencies on auto loan payments

which have already hit rates last seen

during the financial crisis of the late

2000s are also likely to keep climbing

during the financial crisis that is in

2008 five percent of the auto loans were

subprime borrowers whereas now it is six

percent so we’re seeing figures that in

some cases are at the same level or even

worse than the financial crisis of 2008.

the investment research firm game of

Trades produced a graph that is really

shocking it shows the the default rate

on credit card loans that are owed to

banks that are small Banks not the

biggest banks and many of these smaller

and Regional banks are the ones that are

really being hit hard by the rise of

interest rates and you can see that

actually the rate on the default rate on

these credit cards is at the highest

level since 1991 higher than

bubble of

1999-2000 high higher than the 2008

financial crisis higher even than the


game of Trades produced another graph

using Federal Reserve data that shows

that the net worth of households in the

United States is Contracting for the

fourth time since 1990 and the previous

times when U.S household net worth

decreased in the past three decades was

in 2000 in 2001 during the

bubble bursting and the recession of

those years and then of course during

the great financial crash of 2008-2009

and right now once again it U.S the net

worth of U.S households is decreasing

and game of Trades points out that this

is at a time when credit card debt is

one trillion dollars the highest levels

ever and credit card interest rates have

soared above 20 percent they wrote

consumers do not look to be in good

shape and that’s putting it mildly I

mean this could very well be a major

debt crisis

and actually I haven’t even looked at

the worst part of the impending debt

crisis in the United States which is the

real estate sector in particular the

commercial real estate sector which is

pretty much in free fall right now

this is a key part of the United States

economy and what we’ve seen is a massive

decline in the value of Real Estate

Morgan Stanley has warned that

commercial real estate prices in the U.S

could decline by 40 which would rival

the declines in the 2008 financial

crisis and this could have major shock

waves across the rest of the U.S economy

because in many urban areas they’re

built the local economy is built around

commercial real estate if you have an

office building then you have a lot of

people working in the office and they

frequently go for lunch or dinner they

go to the local restaurants or to the

bars and they provide business to those

local Industries and then of course the

city government and the state government

get tax revenues from those buildings

the commercial real estate from the

local businesses so if you have a

collapse in in commercial real estate if

you have many of these Office Buildings

closing down then you’re also going to

see a lot of economic activity in that

area dry up and what we’re going to see

is really the how following out of many

of these urban areas and that also means

a drying out of tax revenues so then you

have local city state governments that

don’t have as much in tax revenue so

they face budget deficits so what we’re

seeing is a Cascade of crises that are

all interrelated and it’s even worse

when you look at the banking sector

which is very heavily exposed to real

estate loans The Wall Street Journal

just published a report this September

warning of a real estate Doom Loop which

it notes threatens America’s Banks

it notes that the commercial real estate

market is in meltdown in the United

States and there are trillions of

dollars in loans and Investments held by

Banks and other firms that are a looming

threat for the industry and potentially

the broader economy this is the danger

of setting off a doom Loop scenario

where losses on the loans held by the

Banks trigger the banks to to cut off

their lending which then leads to

further drops in property prices and

even more losses

The Wall Street Journal has a graph

showing just how heavily exposed the U.S

banking sector is to commercial real

estate since 2015 their exposure has

increased by 1.5 trillion dollars and

the graph points out that much of this

debt met these mortgages are held by

regional and local banks in the United

States and it notes that banks in the

U.S roughly doubled their lending to

landlords from 2015 until 2022 to

2.2 trillion dollars and once again

small and medium-sized Banks originated

many of those loans now this is

especially concerning because in the

United States in 2023 in the first few

months of this year there were three of

the four largest bank collapses in

history I repeat out of the the four

largest Bank collapses in U.S history

three of those collapses have been just

this year in the first few months of

2023 and those were relatively small

Regional Banks like Silicon Valley Bank

like Signature Bank like First Republic

Bank and now we see that there is this

larger looming crisis of exposure to

commercial real estate where the market

is in free fall right now and again

Morgan Stanley said it could fall by as

much as 40 percent in value

now one of the main reasons that those

Banks collapsed was because the U.S

federal reserve the U.S Central Bank has

been aggressively raising interest rates

and this has meant that many banks are

essentially insolvent in the United

States and in other countries where the

value of their Securities the assets

they hold has dropped significantly with

the rising interest rates and they

actually owe more in liabilities than

they hold in assets

the U.S Federal Deposit Insurance

Corporation the FDIC that’s the U.S

government body that was created during

the Great Depression in order to ensure

banks in the United States ensure the

deposits that people hold at Banks the

FDIC released data showing that since

2022 when the FED began aggressively

raising interest rates these Securities

held by these banks have significantly

fallen in value we’re talking about by

hundreds of billions of dollars per

quarter so when there was a run on the

bank like for instance Silicon Valley

Bank when people who held their deposits

at the bank tried to withdraw their

money the bank had to give them that

money but a lot of that money was tied

up in it was invested in these

Securities and because they had fallen

so much in value the bank Silicon Valley

Bank and others First Republic they had

to sell those Securities at a loss they

ended up losing a lot of money and

eventually they went under they had no

more Securities that they could sell to

pay the people who held deposits in

these Banks and of course the US

government bailed them out including the

uninsured deposits of wealthy depositors

of billionaires and big corporations

which I explained in a separate video

which I’ll link to in the description

below but what we’re also seeing here

with the crisis in the commercial real

estate market in the United States is

yet another major problem for the

banking sector which really could

undermine the stability of the entire

Financial system in the United States

that is not an exaggeration considering

how heavily exposed so many banks are to

real estate loans in fact the graph in

the Wall Street Journal article showing

the 1.5 trillion dollar increase in U.S

Bank’s exposure to commercial real

estate loans that those figures actually

in some ways downplay just how much of a

problem this is because as the article

points out that many banks increase

their exposure to commercial real estate

in ways that are not usually counted in

their tallies so for instance Banks lent

money to financial companies that made

loans to some of the very same landlords

and then they bought bonds debt backed

by the same types of properties

so in some ways we see very risky

Behavior that’s not dissimilar to The

Reckless and frankly criminal behavior

that Banks were engaged in that led to

the 2008 financial crash now this is

different but it does show that there

are there are these Investments that are

built upon more debt and more debt and

more debt and there’s often not enough

interrogation asking if this is actually

safe if this money can actually be paid

back or if it can be paid back is the

underlying asset that is the real estate

going to be worth the same in the future

because of course this big bubble this

real estate bubble was ultimately based

on the premise that interest rates by

set by the Federal Reserve would always

remain low forever and that clearly is

not the case so the Wall Street Journal

points out that this form of indirect

lending along with foreclosed properties

trading portfolio folios and other

assets linked to commercial properties

brings Banks total exposure to

commercial real estate to 3.6 trillion

dollars that is equivalent to about 20

percent of their deposits so one-fifth

of the value of the deposits held by

these Banks is tied up in loans and

Investments made involving real estate

and now

what we see is the value of that real

estate is significantly declining

because as the U.S federal reserve has

raised interest rates ostensibly to try

to bring down Consumer Price inflation

in the United States really to actually

try to bring down wages and decrease the

power of labor but as the FED has done

this it has also significantly dropped

down the value of not only Securities

you know government bonds but also real

estate because it’s pretty easy to

explain as interest rates go up it

becomes more expensive to borrow money

and if you look at sectors like real

estate the vast majority at least of

average people they don’t have enough

cash to buy a house especially

considering how expensive houses are

right you don’t have five hundred

thousand dollars in your bank account

unless you’re rich so in most people

most average working people and even

people who make more money than them

they usually go through a bank they get

a mortgage they borrow money to pay for

that house or at least they pay a down

payment and then the bank pays the rest

of it and as collateral the bank says

that if they if the person borrowing the

mortgage can’t pay back the mortgage the

bank uses the house as collateral the

real estate and this is also true for a

company that is investing in commercial

real estate so now that it’s more

expensive to lend there are few people

fewer people willing to take out those

loans from the banks those mortgages so

there’s less demand for the real estate

and as there’s less demand the prices

drop because if it’s very cheap to

borrow money if you can get a mortgage

from a bank with a one or two percent

interest rate then a lot of people would

say fine I’m gonna go buy a house

because I can actually afford the house

instead of paying you know all this

money in rent every month I could pay

that to pay I could instead of paying

rent that money could go to paying off a

mortgage and eventually the house will

be mine although it belongs to the bank

in the short and medium term until the

mortgage is paid off right so what is

happening now is that fewer people are

taking mortgages out because it’s more

expensive to take a mortgage interest

rates are higher and what that also

means is that with less demand people

who are selling their houses don’t have

as much bargaining power to ask for

higher price is so the value of these

houses on the market is dropping and

many of the banks that are holding these

mortgages these holding these real

estate loans now are also dealing with

the collateral that is the real estate

the house or the office that the loan is

backed by also decreasing in value so if

a company can no longer pay the mortgage

on the commercial real estate and they

tell the bank sorry I can’t pay this off

well the bank is left with the

collateral with this real estate that in

some cases is actually now worth less

than it was before when the purchaser

took out the mortgage and if the bank

tries to sell that real estate it’s

going to be sold at a loss

and by the way I should point out that

there’s another way in which the

chronically low interest rates also

contributed to this massive real estate

bubble that is being burst now with the

the significant decline in real estate

value and that is because interest rates

were so low for so long that many

investors many people who had a lot

extra money sitting around they invested

that money in real estate because

interest rates were so low they wouldn’t

invest that money in government

securities in treasury bonds or treasury

bills or many other Investments where

there was low return it was assumed that

real estate was a great investment

because not only did you get a return on

it because you have this bubble that is

being inflated by U.S government policy

and over time the idea is that if you

buy a house the house is going to keep

increasing in value so not only do you

get a physical tangible asset but you

get a return on that investment in scare

quotes over time so a lot of people

we’re not even buying houses to live in

they were buying houses as a form of

speculation as a form of investment and

this was part of this big asset price

inflation bubble being pumped up through

U.S government policy through Federal

Reserve Central Bank policy and since

2022 we now see that bubble has been

bursting with the significant rise in

interest rates by the Fed so when a huge

part of the banking sector is built

precisely on real estate

representing 20 percent of the value of

their deposits and you face this crisis

like we see now it really can

fundamentally impact the stability of

the entire Financial system now one

reason for the crisis in commercial real

estate in the United States is the

growing popularity of work from home

although this is actually exaggerated

and it’s not really the main factor now

this is what you will see some people

talk about but I think it’s actually

missing the forest for the trees and

this is of course because during the

pandemic more and more people were

working from home and even after the

pandemic a lot of people at least if

they have a job where they can do so

they’re working from home still they’re

not going to an office every day and

this has also financially incentivized

companies to cut costs because it’s very

expensive to pay for an office in a the

center of a city like New York or San

Francisco or Chicago or something so

many of these companies have cut costs

they’ve instead gotten smaller offices

and now that means that there is much

more real estate commercial real estate

in urban areas that is empty and as

there is a larger Supply

of more and more real estate prices tend

to go down because there’s not as much

demand so that is certainly a factor

along with the fact that a company

accompanies it which is that during the

pandemic a lot of people moved from

urban areas to Suburban or even rural

areas because you can get a much bigger

house with a yard for less than you can

get a you know a small apartment for in

an urban area so these are all factors

that have contributed to the commercial

real estate crisis in the United States

which is really threatening the

stability of the U.S financial system

but it’s not the main factor it’s easy

to get lost with that but in reality

this most significant factor is the

rising interest rates by the Federal

Reserve so what I think this really

shows is that friend of the show

Economist Michael Hudson is absolutely

right when he said that the U.S economy

has has put itself in a situation in

this dilemma where it can only survive

with low interest rates so that means

that it’s going to have to either accept

High rates of consumer price inflation

with low interest rates or this collapse

that we’re seeing now these major crises

that we’re seeing now because after the

2008 financial crash the U.S federal

reserve dropped interest rates basically

to zero and in fact the real interest

rates were negative because you know you

had interest rates based on on paper

close to zero but then you actually had

a slight bit of inflation Which is

higher than the actual interest rate so

those are negative real interest rates

so what this meant is you had so much

liquidity sloshing around so much money

basically being given out out for free

to the financial sector and then you

also had the policy of quantitative

easing through which the U.S federal

reserve basically printed money and then

bought up Securities not only U.S

government bonds but also invested in

Securities like for instance

mortgage-backed Securities helping these

banks by buying in some cases these

toxic assets that no one wanted to

invest in because they were pretty much

worthless so you had this massive

artificial bubble build up of not

Consumer Price inflation but what the US

government was actually doing was

fueling a big bubble of asset price

inflation pumping up the value of stocks

and bonds pumping up the S P 500 pumping

up real estate and this meant that rich

people who hold Investments got richer

and richer while working people got

poorer and in addition to benefiting the

banking sector these policies helped

enrich the rich in the country they made

the rich even richer because the top one

percent the wealthiest one percent of

North Americans hold 54 of stocks and

the wealthiest 10 of North Americans

hold nearly 90 percent of stocks whereas

the poorest half of people in the United

States only hold 0.6 percent of stocks I

repeat the poorer half of of the U.S

population holds 0.6 of the stocks the


investment website the motley full put

together a very useful graph an

interactive graph showing just how

unequal stock ownership is in the United

States the bottom 50 percent the poorer

half of North Americans own I mean just

basically nothing on this graph you can

see a fraction of one percent whereas if

you look at the top one percent

consistently more than half of stocks

owned by just the wealthiest one percent

and then if you also look at the 90 to

99 percentile we’re talking about over

35 percent so when you combine the top

one percent which as of the first

quarter of 2023 owned 53.6 of stocks


with the 90 to 99 range which as of the


first quarter of 2023 oh owned 23.4

percent together that’s 89 nearly 90 of

stock owned by just 10 percent of North

Americans and by the way when you factor

in racism as well you can see similar

figures white Americans own 89 of stocks

and and of course we know in the lead up

to the 2008 financial crash that many

banks engaged in ex illicitly racist

policies targeting black Americans and

Latino Americans with unfair loans on

very unfavorable conditions and the

banks knew that these families would be

unable to pay off these mortgages and

yet they use those mortgages to create

mortgage-backed Securities and then sold

those mortgage-backed Securities in

tranches of other assets and they built

this huge financial house of cards that

collapsed in the 2008 financial crash so

those were some of the warning signs

that I wanted to look at today and

analyze because we do see a lot of

reporting claiming that the U.S economy

is in such great shape you know

unemployment figures are technically low

although I think the way unemployment is

calculated is not a very useful metric

because a lot of people are under

employed a lot of college-educated

people who have useful skills are you

know they’re Uber drivers they’re

delivering food or whatever on an app

and they have multiple part-time jobs or

gigified jobs and this precarious work

despite the fact that they’re

underemployed they’re not considered in

the unemployment statistics which by the

way also don’t include people who gave

up looking for a job so I mean we see so

many indicators claiming that the

economy is doing so well but I think

more important indicators are whether or

not average working people can buy

groceries can pay their rent and with

the historic levels of credit card debt

default auto loan default and this real

estate crisis I think we can see very

clearly that the economy is not doing as

well as we were being led to believe now

on that note I’m going to end this first

part and I’m going to do another video

very shortly in which I look at the

situation in the global South which is

significantly worse the debt crisis that

were that is largely caused by these

very same Financial policies of the

United States the U.S federal reserve in

particular with its aggressive hiking of

interest rates but furthermore

there are definitely geopolitical

elements here the new Cold War policies

taken by the United States against China

and Russia the proxy war in Ukraine the

sanctions on Russia and many other

factors I’m going to be looking at that

in part two I’m going to conclude here I

want to thank everyone for joining me

today please subscribe on whatever

platform you are watching or listening

on I’m Ben Norton this is geopolitical

economy report and I’ll see you in part





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