Outlook for 2025: Depression, Debt, Default & Destruction | Martin Armstrong

The year 2025 marks a critical turning point, with a global economic crisis on the horizon. Our computer models predict a major downturn, particularly in Europe, and a prolonged US recession extending into 2028. This crisis stems from long-term mismanagement by central banks, especially the Federal Reserve, which kept interest rates too low for too long, forcing banks to hold risky government debt. While analysts focus on short-term rates, the Fed has little control over long-term rates, which continue to rise despite rate cuts. Tensions in Europe, including the threat of World War III, are exacerbating this issue and pushing rates even higher.

» While financial elites are aware of the looming collapse, everyday people will feel its full force. «

The rise in long-term rates reflects a loss of confidence in government debt. For instance, corporate bonds in France are now offering better returns than government bonds, and even Greece's debt is becoming more attractive. This points to systemic weaknesses within European governments. Meanwhile, the US faces its own dilemma: raising rates to combat inflation only makes its national debt more expensive. As the world's largest borrower, higher rates simply add to the debt burden rather than reducing spending. This crisis underscores the failure of Keynesian economics, which Paul Volcker acknowledged in 1979. Today, the US government borrows far more than in the past, and raising interest rates does little to curb spending—it only adds to the debt.

The financial system is now in deep trouble, and the average person will bear the consequences. Europe is headed for a depression, and the US is facing a severe recession. Unemployment will rise, wages will shrink, and basic goods will become more expensive. The gap between the rich and poor will widen, and financial instability will increase. A sovereign debt default in Europe by 2025 is likely to trigger a broader collapse, with massive financial instability by 2026-2027. Many banks and pension funds are heavily invested in government debt, and a default could lead to the disintegration of European financial systems. Insiders are very much aware of the crisis and fear that public panic could worsen the situation, potentially triggering bank runs. While not all banks are equally at risk, poor management and political interference in banking have worsened the problem. The Federal Reserve, designed to act as a backstop for failing banks, may be overwhelmed by the scale of the crisis.

 

The impact on ordinary Americans will be severe, with rising unemployment, shrinking wages, and higher living costs. While financial elites are aware of the looming collapse, everyday people will feel its full force. The US government’s failure to roll over its debt could spark a chain reaction, causing widespread bank failures. The interconnectedness of the banking system means one collapse could trigger a broader financial breakdown. Cash will become essential, as digital transactions and credit systems may fail, as seen in previous disruptions like the Canadian trucker protests.

I strongly recommend preparing for this crisis by having physical cash and at least two years' worth of food stored. The collapse of the financial system will lead to widespread losses in banks and pension funds, and the government and central banks will be unable to protect everyone. Those who are unprepared will suffer the most.

 November 2024: A Norwegian task force has advised against the immediate adoption of a central 

bank digital currency, while South Korea has launched a CBDC pilot with seven major banks.

As the debt crisis worsens, geopolitical instability will exacerbate inflation and push capital into the US as a safe haven. The dollar will strengthen, and sectors like gold, food, and bonds will see increased investment. However, emerging markets with high foreign-denominated debt, such as Brazil, will be particularly vulnerable to financial crises.

I also caution against the growing threat of Central Bank Digital Currencies (CBDCs), which would grant governments unprecedented control over personal finances. The rise of gold as a long-term safe haven, coupled with rising long-term interest rates, will create significant risks for those holding variable-rate debt. People should prepare by securing tangible assets like cash, food, and gold, and locking in fixed-rate debt where possible. The coming crisis is inevitable, and those who prepare will have the best chance of weathering the storm.

Reference:
Martin Armstrong (December 21, 2024) - Depression, Debt, Default & Destruction in 2025. (video)

 

See also:

TPR (December 10, 2024) - 2025 in J.M. Funk’s '56-Year Cycle of Prosperity and Depression'.

Lu Qiyuan (December 8, 2024) - Scott Bessent's Covert MAGA Strategy for Trump 2.0.  

 Martin Armstrong (June 21, 2024) - Final Days of the Empire. (video)

L. David Linsky (2023) - War and or Revolution in 2026. The 84 Year War Cycle.

Bojan S. Dimitrijević et al. (2016) - Sunspots and Stock Markets: Evidence of their Interdependence in Transition Countries.

Mikhail Gorbanev (2012) - Sunspots, Unemployment, and Recessions: Can the Solar Activity Cycle shape the Business Cycle?

Scott Bessent's Covert MAGA Strategy for Trump 2.0 | Lu Qiyuan

Many people believe Trump 2.0 will be a 'peaceful' presidency, but I think they are mistaken. If war becomes the best option to overcome the US crisis, Donald Trump will not shy away from further conflict. Trump and his team are determined to maintain US dominance on the global stage as an empire—nothing has changed in that regard. While some may hope for the decline of the US empire, and I can understand that sentiment, the following isn't about whether the US should or shouldn't remain an empire. It's about how the Trump 2.0 administration is attempting to salvage the situation.

 

 Lu Qiyuan, Geopolitical Economist.

Through Elon Musk, Trump will aim to reform and abolish much of the federal bureaucracy, including challenging some of the core interests of the military-industrial complex. If he succeeds, it could shatter the entire establishment system, including the massive oligarchy operating behind it, particularly in the pharmaceutical and military sectors. However, the question remains: Can Elon Musk and his new department, DOGE, accomplish this goal? Honestly, I don't think he can. To make America great again (MAGA), there are three things the United States and its leadership must avoid:

• The collapse of the US military: To prevent the US military from collapsing, significant reform is necessary. As it stands, the US military is only capable of operating at the battalion level and is no longer able to challenge a major power in large-scale conventional warfare. While US combat tactics and intelligence networks remain the best in the world, the country’s conventional forces—including the Army, Navy, and Air Force—are falling behind. The US still holds an upper hand over smaller or medium-sized countries, but in conventional warfare with a major power, the military would stand little chance. If this situation persists for another five years, the US will be unable to challenge even medium-sized nations. The military’s strength today lies in special forces, covert operations, and tactics like assassination—but in terms of large-scale warfare, as seen in Ukraine, the US is no longer capable of handling such conflicts. This is a serious issue. The US military cannot collapse; it is a basic requirement for maintaining a global hegemonic empire. Over time, parts of the military have been privatized, but these private forces are unlikely to match the capabilities of groups like Russia’s Wagner, and their loyalty could be questionable. This privatization has left the US military in a fragile state.
• The collapse of the US dollar: To stabilize the US dollar, the US must address its looming debt crisis and budget deficit. At $40 trillion in federal debt, the US is approaching a dangerous threshold—a breaking point after which the dollar could face a severe collapse. This wouldn't necessarily mean a collapse against other currencies, but rather a collapse in value relative to assets like Bitcoin, gold, or other key commodities. This is a critical issue that cannot be postponed. The US needs to begin addressing this problem by 2025 and show clear results by 2026.
• The collapse of US capital markets: The US capital market is a key pillar supporting the US empire. To prevent its collapse, the US must achieve a degree of reindustrialization. Currently, the capital market is one of the few remaining supports for the US dollar itself.

But let’s now turn to Scott Bessent, whom Trump has chosen as his Treasury Secretary. To me, Bessent is the real gladiator behind Trump 2.0, not Elon Musk. I believe Bessent is one of the most important members of Trump’s Cabinet, and his role will be crucial in keeping the US empire alive. So, when Scott Bessent enters the Trump Cabinet, we can be sure that Trump’s ultimate support still comes from the same old force, because Bessent is one of the most powerful champions of the US establishment deep state.

 

» Bessent is one of the most powerful champions of the US deep state. «

 

Bessent is extremely intelligent and capable. Many are confused about George Soros' financial attacks around the world, including his famous campaign against the British pound in 1997. The truth is, it wasn’t Soros who was the main architect behind that; it was Bessent. Soros became famous because of Bessent, not the other way around. Bessent’s capabilities go beyond what most people can imagine. He possesses a deep understanding of monetary, currency, and financial systems—and, more importantly, he has real-world combat experience in financial warfare. He is a genius. But like everyone, Bessent also has his flaws. People like him, who are highly capable and self-confident, often don’t hide their moves or intentions. He has outlined the following four main goals for the Trump 2.0 administration:

1. The US budget deficit must remain within 3%.  
2. The US GDP growth must exceed 3%.  
3. The US crude oil production must increase by 3 million barrels per day.

4. The US must turn Mexico into an economic vassal to replace China in their supply chain.

Let me offer my prediction: In terms of US debt control, Scott Bessent suggests that the federal deficit needs to be limited to around $1 trillion for fiscal year 2025. This is nearly an impossible task. According to my calculations, US debt will reach $40 trillion by the end of the third quarter of 2025. Achieving this goal would require drastic cuts to federal spending, and I don’t believe Elon Musk has the ability to accomplish that. The US federal government simply won’t be able to generate enough revenue in time to cover the deficit. If the goal is to increase state revenue, the only way would be to militarize the entire country—which is not only nearly impossible, but something I would strongly advise against.

As for the 3% annual GDP growth goal: I believe it is achievable. Given Bessent’s capabilities, I think he could reach this target by maintaining a capital accumulation rate above 6%.

 

» You know what I did? I left troops in Syria to take the oil. I took the oil. «
Donald Trump in a January 2020 interview on Fox News.

Now, let’s focus on the goal of increasing crude oil production by 3 million barrels per day in the US: This is one of the clearest indicators of Trump 2.0’s strategy. But why 3 million barrels? Why this specific number? This is not a random figure. Do you know how much OPEC is reducing its production? Exactly 3 million barrels. Saudi Arabia has cut production by 1 million barrels, Russia by nearly 1 million barrels, and the remaining reductions add up to roughly 3 million barrels. So, while OPEC is cutting production by 3 million barrels, the US is increasing its production by the same amount.

Do you think Scott Bessent wants oil prices to fall? To crash? Maybe down to $20 a barrel? Do you think the energy giants would be happy with that? No, they would be furious because the cost of production in the US is around $30 a barrel. Do you think Bessent hasn’t thought about this? Of course, he has. He likely predicts, just as I do, that oil prices could rise to $150 a barrel. That’s why I said Bessent shouldn’t have made these statements public—they act as a warning signal about a potential US military operation. It suggests that the US might be preparing to take action against Iran and, in doing so, potentially shut down the entire Persian Gulf. That’s why Bessent wants to increase US crude oil production by 3 million barrels.

 

 

» When I left in 2021, Venezuela was ready to collapse. We would have taken it over. 

We would have gotten all that oil. It would have been right next door. But now we're buying it. «

Donald Trump, June 10, 2023.

For those who don’t understand the logic behind this, there’s a fundamental principle of supply and demand in the oil market: When OPEC reduces production, it typically signals a slight decrease in demand. However, when supply drops dramatically—such as due to war—prices can skyrocket, often exponentially rather than linearly. The US, as one of the few remaining major oil producers, stands to benefit from a major conflict in the Persian Gulf. With countries like Russia and Venezuela under heavy sanctions, the US could potentially monopolize oil prices, using this leverage to strengthen the US dollar against other currencies. This is essentially the same strategy the US employed in the Ukraine conflict, where by provoking the war and cutting off Russia’s energy supply to Europe, the US launched an attack on both the euro and the ruble.

 

 » Mexico is gonna have to straighten it out really fast, or the answer is absolutely. «

Donald Trump, November 25, 2024.

Scott Bessent, normally an extremely capable strategist, shouldn’t have revealed these goals so early, as doing so gives countries like China the chance to prepare and implement countermeasures. His statements now serve as a warning signal to world leaders about what’s to come and suggest that it is less likely the US will directly provoke a proxy war targeting China. During the anticipated surge in oil prices, the US could successfully collapse the euro, the Japanese yen, and the British pound, helping Scott Bessent achieve his goal. 

 

 

» Trump suggested missile strikes into Mexico against drug cartels. «
Mark Esper, Secretary of Defense in the first Trump administration, May 6, 2022.

On top of that, there's an additional strategy: The US could swiftly vassalize Mexico, rapidly industrialize it, and use it to complete a North American internal economic circulation. This would be the only way the US could successfully reindustrialize. Essentially, the US would turn Mexico into an economic vassal, replacing China in its supply chain. In fact, the most direct and simplest way for the US to reindustrialize would be to militarily occupy Mexico and use it as a substitute for China in its economic system.

Reference:
Awakening Richard (December 6, 2024) - Top Chinese Economist Exposes US Secret Plan. (video)

 

See also:

Pepe Escobar (November 28, 2024) - Trump’s Coming War on BRICS and the Global South.

Dmitry Skvortsov (November 25, 2024) - Trump's Plan to Ruin China.

 Francisco José Fernández-Cruz Sequera (October 30, 2024) - Global MAGA-nomics.

 Serge Bernard (2015) - From Conquest to Affluence to Collapse: The 250 Year Empire Life Cycle.