Introduction to MEGA RETURNS: Profit from Maximum Pessimism by David Skarica End of the Debt Super Cycle I initially began to write the majority of this book in 2019 prior to the outbreak of COVID-19, better known as the Coronavirus, a pandemic which made an unprecedented impact on the global markets. The financial impact of a widespread pandemic is something the modern global economy has never witnessed before. While we know COVID-19 is a driving factor in the crash of 2020, it is also an excuse for the market to "sell off" and to "correct". We had an immense build-up of debt and speculation in the market, resulting in the entire market becoming a massive "bubble." When the market bubbles, or "tops out" as it did at the end of February 2020, the sell off was a warning. However, what happened after Covid was an even larger bubble was created. Governments gave out free stimulus money, rates were cut to zero and trillions were printed and borrowed. This poured into asset markets and created the "mother of all bubbles" with everything from real estate in South Carolina to stock prices in China affected.

We are coming to the end of an era; the era[JAM2] that has continually picked up steam and accelerated since the 2008 financial crisis. This is the end of an era, an era of ever increasing debt from both the public and private sector and the feeling that central banks through the magic of the printing press can solve all of the economies problems. Since the United States got off the gold standard in 1971, we have seen an explosion of debt at all levels of the global economy. From government debt, consumer debt, investment corporate debt, junk corporate debt, student debt, to emerging market debt; the list goes on. When the global economy went pure fiat in 1971 it meant that nothing backed the fiat dollars and other currencies in circulation, so governments could de facto print as much money as they wanted for social programs, wars, bailouts during economic crises, whatever they felt was necessary to print and spend on. Back in the 1980s there was a period of financial liberalization; Ronald Reagan, Margaret Thatcher and other leaders deregulated financial markets. This, combined with a pure fiat system, became a perfect scenario for the financial markets as a whole. The financialization of New York, London, along with currencies that could be printed limitlessly, resulted in great prosperity in the financial and credit markets.

For the last 13 years, the explosion of debt and ease of money printing has caused global stock market and property market expansion. However, it has also left governments worldwide vulnerable to a large downturn in the economy. The end result of these bailouts is grim; the impending downturn will inevitably bankrupt affluent Western nations and send shockwaves through second tier economies. I firmly believe we are nearing the endgame of this debt super-cycle and the "Corona Crash" is the catalyst for the impending transition. Since 2009, we have seen a gross acceleration of the aforementioned debt bubble. During the worst periods of the 2008 financial crisis, governments saw an explosion in deficit spending to keep economies afloat, and in many cases had to rack up enormous deficits in order to bailout the financial system. Take Canada for example, a nation which had a debt to GDP ratio of about 70% before the 2008 financial crisis. Canada''s debt to GDP ratio is now near 120%, and if you were to include the Canadian provinces, each of which have their own debt issues, the debt to GDP ratio is closer to 150%.

Australia, which had one of the lowest debt to GDP ratios at only 16% before the financial crisis has seen their ratio more than double to 60%. Similarly, Canada and Australia have private debt to GDP of over 150%, with the value in their respective property markets skyrocketing. Private Debt to GDP in Canada is at an astonishing 170%, as mortgage debt has exploded during the housing boom (and bubble) during the last 15 years. These offshoot bubbles, such as the property bubbles in Australia and Canada and corporate debt bubbles in the United States, are all based on low interest rates. This will have a major effect on the debt driven portions of the economy, which has benefited from the debt cycle and cheap money. Therefore, if interest rates climb in a debt crisis, it will absolutely affect all parts of the economy. Even the so-called "creditor nations" have seen debt expand in an attempt to grow their economies. China has seen debt to GDP rise from 33% in 2007 to 60% currently.

However, this does not take into account the massive expansion of the Chinese banking system. By some estimates, the Chinese banking system is five times larger than the U.S. banking sector was at the height of the housing bubble! The increase of debt is not unique to the government''s deficit. In fact, a similar trend can be seen across many different sectors. Student Loans in the United States, estimated at roughly $650 million dollars before the financial crisis, have now surpassed a figure of 1.5 trillion! With the current administration now trying to pass student loan forgiveness. Furthermore, corporations have tripled their debt in the last 20 years from $3 trillion to $10 trillion - a figure which comprises nearly 40 percent of GDP.

Keep in mind much of this corporate debt was incurred by funding buybacks and keeping the stock market bubble afloat. The biggest issue with all of these staggering numbers is very simple. The room for growth is limited. Before the current financial crisis, many governments had low debt to GDP levels after a near twenty-year global economic expansion. However, these debts accrued as governments ran huge deficits to keep economies afloat during the financial crisis. Subsequently, the failure to balance budgets and pay back debts during the time of economic upturn has led to. for many large corporations and governments alike. Nowhere is this more apparent than in the United States, the global superpower and largest economy in the world, where nearly ten years into an economic expansion, deficits were running over $1 trillion (nearly 5 percent of GDP prior to 2008).

This failure to properly manage deficits in a time of economic prosperity leaves us in a position where debts went to $4 trillion or nearly 16% of GDP at the depths of the Covid crisis. The danger is that there is no cushion for debt to continue to accrue in the future; there is a limit. The government will not be able to stimulate or absorb downturn after another market crash on par with 2008. If there is any sort of return to the "bond vigilantes" (investors who will crush bonds and raise longer term interest rates looking for larger returns or forcing governments to become financially solvent) then governments will be broken at every major international level. We are seeing this play out in Europe as due to the energy and cost of living shock due to the war in Ukraine and terrible energy policies in Europe the government is having to borrow and spend to absorb the cost of living crisis and spikes in prices. The government bailed out the financial sector during the last two financial recessions but who will bail out the government? We already witnessed this from 2010 to 2012, as the so-called "PIIGS" countries (Portugal, Ireland, Italy and Greece and Spain) saw interest rates spike as their debts went out of control following the recession. This debt crisis was controlled by the ECB (European Central Bank). Europe is again bailing out its economies as cost of living spikes.

However, I am primarily concerned with the impending scenario where superpowers such as China and the United States will need to be bailed out as their asset bubbles burst. With all that being said, this book is not all doom and gloom. While the current state of the global economy is indeed alarming, you must not let the failure of large governments and multinational corporations to properly manage their funds negatively affect your investment decisions. In fact, quite the opposite - with the bursting o.