In a recent video, Real Vision founder and CEO Raoul Pal revealed his insights into the “Great Unraveling” of the global economy, a term he coined to describe the impending economic collapse. Raoul’s deep understanding of macroeconomic trends allows him to connect the dots and provide valuable context to investors and market watchers alike.
Raoul begins by explaining that the world is on the brink of a monumental debt crisis. This situation is the result of central banks’ attempts to stave off economic collapse following the 2008 financial crisis.
By injecting trillions of dollars into the economy through quantitative easing, central banks have created a precarious environment characterized by excessive risk-taking, artificially inflated asset prices, and ballooning corporate and sovereign debt.
The Irreversible Chain Reaction
According to Raoul, this massive debt burden is set to trigger an irreversible chain reaction that will ultimately lead to the Great Unraveling. He emphasizes that the global economy is an interconnected system, and when one domino falls, it’s only a matter of time before others follow suit.
The first domino is the overleveraged corporate sector. Raoul highlights that corporations are more indebted than ever before, with some industries, such as the energy sector, already showing signs of distress. As these companies struggle to service their debt, defaults, and bankruptcies will become more prevalent.
The second domino is the sovereign debt crisis. Raoul points out that countries like the United States, Japan, and Europe are all grappling with unprecedented levels of debt. When these governments can no longer service their obligations, the bond markets will come under severe pressure, leading to higher interest rates and even more economic hardship.
The third domino, according to Raoul, is the potential collapse of the financial system itself. With banks and financial institutions exposed to both corporate and sovereign debt, the domino effect will put immense strain on the system, leading to the possibility of a widespread banking crisis.