"Everything from Brexit to China's economic and financial bubble, to the thought of the Fed raising rates, all of these near-term nuisances of politics and financial maneuvering converge into one overall theme: debt.
More importantly, how debt is managed.
Over the past years, I have talked about how the debt bubble – short of a global financial reset – has no choice but to get bigger.
And that's precisely what's happening.
We're not talking a small amount either; the world is now issuing trillions upon trillions of new debt every year.
In the U.S., it grew to a staggering 331%.
In Japan, over 400%.
Many countries in Europe, such as Ireland, Portugal, Belgium, Netherlands, Greece, Spain, and Denmark, are all over 300%.
In other words, the total debt-to-GDP ratio in the nations that contribute to the four main world currencies – the Dollar, Yen, Euro, and Yuan – all have exploding debts that are continuing to, well, explode.
This is precisely why central banks around the world are not only NOT raising rates, but some have already deployed negative rates, including Japan and the E.U. – home to two of the five world reserve currencies.
So while most central banks are talking about negative rates, the Fed is the only one talking about raising them.
But if the Fed raises rates too soon, the U.S. will certainly see a decline in exports, which then makes it harder to collect the necessary taxes to pay for its growing debt.
Negative Interest Rates
So, it was no surprise that the Fed announced that it would keep interest rates at 0.25% this week.
The Fed and other central banks believe that if they lower rates, people will spend more or invest in riskier assets because the cost of storing cash becomes too high.
And since governments around the world (including the U.S.) are the biggest borrowers of money, low-interest rates are great.
It means these governments can continue to borrow money and go deeper into debt. The government's idea is that by spending cheaply borrowed money, they can pull themselves out of debt through economic growth and tax collections.
It also means that banks can borrow money for next to nothing – literally free cash – and then earn profits from that money by lending or other activities such as investing.
On the flip side, if you're responsible with your money and save – say for your kid's college tuition or your retirement – low-interest rates aren't so good.
That's because when you leave your money in the bank, you might earn a small interest rate. Given how low rates are today, that's likely 0.1% interest.
In the U.S., inflation has averaged over 2% since 2000. That means that when you adjust for inflation, people who keep their money in the bank are actually losing money every year.
The problem is that no matter how much our governments spend, they simply can't fix the growing debt problem because of the amount of money required just to service that debt.
The Double-Edge Sword
The lower the interest rates, the more we go into debt.
The more we go into the debt, the more the central banks – the primary holders of this debt – maintain control.
So we're really in a lose-lose situation.
If we raise interest rates, nations around the world are crippled because their ability to pay off this debt is diminished as a result of the mass amount of debt they accumulated at a low-interest rate.
Global debt has grown by at least $57 trillion (2014*) to $199 trillion, and no major economy has decreased its debt-to-GDP ratio since 2007.
* We're well beyond that number today.
But at the same time, leaving interest rates low just leads to more borrowing, and the only way to service that debt is by more borrowing.
In the end, the central banks win by maintaining direct control of the world's governments through monetary policies. If a central bank says jump, a country has to ask, "how high?"
If our governments don't do as ordered, the central bank simply raises rates, and the country falls into money trouble.
And Canada is no exception, especially since Trudeau is now leading us on the same path.
Canada and Trudeau
Last week, I talked to a mortgage broker about interest rates.
He said that it's probably best to lock something in because Canada is likely raising rates since we often follow in the footsteps of the U.S., whose central bank has suggested that rates will be raised.
But then I asked him about the housing bubble we currently face.
I asked, "If rates are raised, wouldn't our housing market be crushed because so many new homebuyers have taken out massive mortgages based on low rates?"
He said that could happen, but banks are very strict with their lending practices in Canada.
Then I asked, "What about Trudeau's plan of spending billions upon billions of borrowed dollars, based on the assumption that interest rates will remain low?"
He started to scratch his head.
My point is this: With Trudeau's budget and our current housing situation, the likelihood of Canada raising rates anytime soon is highly unlikely.
Especially when Trudeau tells us that this year's $30 billion deficit is not a hard limit.
"Prime Minister Justin Trudeau suggested on Thursday that a $30 billion budget deficit was not a hard limit as the government's focus should be on spurring economic growth.
In a wide-ranging interview, Trudeau, 44, said he was not obsessed with a "perfect number" for the budget deficit and instead vowed to find the right path to economic growth, saying that was more important than a specific deficit target."
Perhaps this is yet another reason why Canadian investors, including institutions, are becoming more speculative. Money is cheap and will likely remain cheap, and the cost of holding money is more than it would be to deploy it in riskier assets.
So what's the solution?
Government Experiments on Free Money
The only way out is to either raise taxes exponentially, which hurts the economy, or the last and final resort: helicopter money.
What is helicopter money?
Helicopter money is exactly what it sounds like: free money from the skies.
To make things simpler, imagine a tax break or a tax refund given directly to you by the government, which borrowed it from the central bank.
Of course, it's only temporarily free. The money is still owed by the government to the central bank.
And government debt equals taxpayer debt.
It's essentially forcing you to borrow money from the central bank.
Don't think for one second that this is a far-fetched idea.
In fact, not only did Janet Yellen not raise rates this week, she actually alluded to the fact we could see helicopter money coming:
"It is something that one might legitimately consider."
In Europe, lawmakers are already urging the central bank to deploy free money to citizens.
"In an open letter to ECB president Mario Draghi, 18 members of the European Parliament's social democrat, leftwing and green groups, say that the ECB should look at helicopter money as well as buying bonds from the European Investment Bank "as possible solutions to enhance economic development through direct spending into the real economy."
Don't think Canada is out of the question. In fact, basic income experiments are underway – an experiment whereby the government gives people money for free, for nothing.
In Japan, this is already happening through government asset purchases of stocks.
So what's wrong with free money (aside from the fact it's not really "free")?
