“One of the questions I am asked most frequently in my global travels is what will be the cause of the next financial crisis…

My answer is always the same: We can be certain the crisis is coming and can estimate its magnitude, but no one knows exactly when it will happen or what the specific catalyst will be.

… You recall that the financial panic of 2008 actually started in 2007 with massive loan losses in subprime mortgages…

Now a new loan loss crisis is unfolding. The new crisis is not in mortgages but in student loans…

Total student loans today at $1.6 trillion are larger than the amount of junk mortgages in late 2007 of about $1.0 trillion. Default rates on student loans are already higher than mortgage default rates in 2007. This time the loan losses are falling not on the banks and hedge funds but on the Treasury itself because of government guarantees.

…Not only are student loan defaults soaring, but household debt has hit another all-time high. Student loans and household debt are just the tip of the debt iceberg that also includes junk bonds (again, as I explained yesterday), corporate debt and even sovereign debt, all at or near record highs around the world…

Source: Multiple Risks Are Converging on Markets – The Daily Reckoning

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