With almost US$250 trillion in outstanding debt globally (more than one-third higher than pre-GFC levels), fueled by record low interest rates, major central banks worldwide can no longer stem the looming global debt deflation. And let's not forget that central bankers don't determine interest rates anyway, the market does. And the market trend is increasing rates.Australia's record level of household debt - to income, rental yield and GDP - on the back of a debt-fueled speculative housing bubble has never looked more precarious in our history. An unavoidable and historic global credit crunch will see a dramatic contraction of credit along with surging offshore funding costs for Australian banks. This sudden holt in credit will also result in an unprecedented debt deflation and collapsing asset prices globally (most disconcertingly in Australian house prices which would threaten the nations banking system). It's always difficult to forecast the timing of such events, but given global warning signs and indicators it should become apparent during 2019.
