Dawn J. Bennett recently interviewed John Rubino, a financial publisher, columnist and author, on Financial Myth Busting. In the interview, Bennett and Rubino discuss Donald Trump’s presidential victory and the economy.
A financial market crash has been in the making for some time now. According to Rubino, “Trump cannot fix what’s coming because we’ve already borrowed the money that’s going to cause us nightmares in the future. You know, we can’t pay back our current debts so it doesn’t really matter if we borrow more and try to grow the economy in the future, which is Trump’s strategy. You can’t fix excessive debt with more debt. So that crisis that’s heading our way is baked in the cake already.”
He continued, “Sometime in 2017 I think there’s going to be a reckoning in which it becomes clear that the system is broken and nothing that Donald Trump or anybody else around the world is doing will fix it and then at that point you get this massive panic. That’s what’s out there, you know, everybody heading for the exits.”
America’s massive national debt is on pace to expand about $2 trillion just this year. Bennett says she thinks it’s creating an economic crisis, regardless of who’s in Washington. Rubino says the nature of financial bubbles is they always go longer than you think they should. The tech stock bubble in the ’90s, for instance, went on several years longer beyond historically high stock market valuations. The same happened with the U.S. housing bubble.
“And this is the biggest bubble of all time, what we’re living through right now, because it’s global,” Rubino says. “You know, it’s the world’s money that’s being blown up. So it shouldn’t be a surprise that we’re going further into the twilight zone in part of this process than you would think based on just rational analysis. But bubbles always end the same way.”
He continued, “The imbalances become untenable and they blow up. That will happen this time around. We can’t say when exactly but we know that the dynamic of a bubble is pretty much etched in stone, you know, it expands and then it pops. So when it pops it’s going to be unlike anything we’ve seen in our lifetime certainly because we’ve never had this kind of an imbalance. Therefore the bursting of this bubble will be bigger than anything that’s come before.”
Today’s financial imbalances are much bigger than they were in 1929, according to Rubino. He says it’s hard to predict what will happen because we’ve never been here before.
“This is bigger than anything we’ve ever seen so you can’t say for sure how it’s going to play out but you can say with a high degree of certainty that it will be chaotic and it will be scary and bad for most people,” he says.