The World and $250 trillion: Taking Stock Of The World’s Debt

 

The world has never had as much debt as it has right now—nearly $250 trillion.That figure is three times what it was two decades ago, according to a Citigroup analysis of data from the Institute of International Finance. The biggest borrowers: the U.S., China, the eurozone and Japan, which have more than two-thirds of the world’s household debt, three-quarters of corporate debt and nearly 80% of government debt. Growing debt goes hand-in-hand with growing economies, and for every borrower there is a lender for whom a loan or a bond is an asset. But large debt loads can be signs of trouble if borrowers can’t repay, and pockets of untested borrowing have sprouted in the decade after the financial crisis: corporate debt in China, foreign-currency borrowing in emerging markets, newly popular forms of debt among American households. And the world’s debt loads are about to get a big test: Global central banks, which once kept borrowing easy, are changing course. “We’re in a new era,” said Emre Tiftik, deputy director of global capital markets at the Institute of International Finance. “Debt levels can serve as early warning signals that alert to overheating in specific countries and sectors.” In recent years, government debt has grown sharply, a shift from the private-sector borrowing surge that preceded the crisis. It was governments that borrowed extensively to help power through the aftermath. Many investors are confident that wealthy countries which issue debt in their own currencies—the U.S. and Japan chief among them—pose little threat to markets. (With the exception of the U.S., Group of Seven countries have lowered debt relative to their economic output in recent years.)

 

353209617_ScreenShot2018-12-27at9_27_39AM.png.9a14737b4698513b6350d4eb8f713202.png

  • Like 1
  • Upvote 1

Share this post


Link to post
Share on other sites

Elites making up a play money game to benefit themselves. What could go wrong?

  • Like 1
  • Upvote 1

Share this post


Link to post
Share on other sites

It will not end well. The higher yield curve will take away most of the growth through higher interest payments. The Fed has moved too fast and increased rates at the short and long end of the curve simultaneously.

  • Like 1
  • Upvote 1

Share this post


Link to post
Share on other sites

Dividing $250 trillion by 8 billion people yields $31,250 per person. Another way of looking at this is by household, which would divide the 8 billion by 2.5, or multiply the $31,250 by 2.5, which yields $78,125.

While the topline number of $250 trillion is easy to extract from various government reports, interest rates on this debt run from 'negative' (Swiss and Danish soveriegn bonds) to the Argintinian central bank rate of 59.38%. There are no double higher interest rates depending on how strictly these are calculated - these are correspondingly high risk loans, either to the lender, the borrower, or both.

China's debt load is interesting for various reasons. Chinese SOE (state owned enterprises) don't default, since doing so would put workers out on the street and trigger unrest. So it's helpful to see what happens in the real world when debt is simply rolled over and extended indefinitely. China's debt, furthermore, is held within the country - most debt is 'domestic'. In this respect China has little real obligation to report it's debt liabilities to international bodies.

In the real world, money is borrowed for 'make work'. Workers continue to produce steel and aluminum despite zero demand. Therefore, the country's 'real' assets are squandered - labor, coal, minerals, and the environment. This is also evident from the 'ghost cities' where (according to current reports) 50 million housing units are vacant. This means construction workers were hired to convert unneeded concrete into unneeded condominiums.

This gets amplified if the Chinese workers are employed in building 'Belt and Road' infrastructure projects in foreign countries. Developing countries are obligated to 'repay' China for the 'favor' of building railroads, ports, roads, etc., some of which are valuable and some of which are useless. Mostly the favor is the Chinese government keeping Chinese workers busy. Getting foreigners to pay for it (or at least obligated to pay it) is icing.

The follow-on implication is that the Chinese governing establishment views the Chinese labor pool as inexhaustible. One consequence of this is that people are so busy mining coal, waiting in traffic, and making widgets that they don't have any time to raise kids. Therefore the Chinese birthrate is 'below replacement'. A rational reallocation, in such a circumstance, would be to structure policies to be 'family friendly', which would mean making it easier for parents to raise their families on an appropriate mix of job security, affordable housing, medical benefits, and educational services.

Perhaps this is being done. The only people that know are deep within the bureaucratic machinery of the state.

  • Like 1
  • Upvote 2

Share this post


Link to post
Share on other sites

(edited)

Debt is an investment into the future .

There will be a light at the end of the tunnel almost everywhere .

 

The housing debt crisis in the USA around ten years ago had been ignited by newly invented financial tradeable products . A mobile society has difficulties to settle for long terms in neighbourhoods , especially when the value of houses might decrease because of mass immigration and section 8 housing . 

 

Government debt is used to print money , and a currency , that wants to supply large aspects of global merchant trade with banknotes , would need to create large government debts . China seems to do that currently , to establish the Renmimbi or Yuan? as a world wide recognized monetary tool .

 

The International Monetary Fund has put the Renmimbi into it's basket of a few currencies for interaction recently .

 

The interest rates in Europe are still low , so my guess is , that borrowers in the USA will switch to European banks for replacing scheduled loans .

 

Edited by Karl V
sheduled -> scheduled
  • Like 1

Share this post


Link to post
Share on other sites

Someday the entire financial system will collapse because we can't add debt much faster than real economic output is growing forever. Google, 'Satyajit Das' and read his latest article on the Bloomberg website. The system is going down, but like Das wrote in MarketWatch articles, nobody can say when the collapse will begin, or what event will trigger it. I suspect that governments can keep the system afloat until global oil productions begins to decline. I call it 'past peak oil'. When that year will arrive, I doubt even Exxon or Shell can say. 

Share this post


Link to post
Share on other sites

15 hours ago, damirUSBiH said:

 

The world has never had as much debt as it has right now—nearly $250 trillion.That figure is three times what it was two decades ago, according to a Citigroup analysis of data from the Institute of International Finance. The biggest borrowers: the U.S., China, the eurozone and Japan, which have more than two-thirds of the world’s household debt, three-quarters of corporate debt and nearly 80% of government debt. Growing debt goes hand-in-hand with growing economies, and for every borrower there is a lender for whom a loan or a bond is an asset. But large debt loads can be signs of trouble if borrowers can’t repay, and pockets of untested borrowing have sprouted in the decade after the financial crisis: corporate debt in China, foreign-currency borrowing in emerging markets, newly popular forms of debt among American households. And the world’s debt loads are about to get a big test: Global central banks, which once kept borrowing easy, are changing course. “We’re in a new era,” said Emre Tiftik, deputy director of global capital markets at the Institute of International Finance. “Debt levels can serve as early warning signals that alert to overheating in specific countries and sectors.” In recent years, government debt has grown sharply, a shift from the private-sector borrowing surge that preceded the crisis. It was governments that borrowed extensively to help power through the aftermath. Many investors are confident that wealthy countries which issue debt in their own currencies—the U.S. and Japan chief among them—pose little threat to markets. (With the exception of the U.S., Group of Seven countries have lowered debt relative to their economic output in recent years.)

 

353209617_ScreenShot2018-12-27at9_27_39AM.png.9a14737b4698513b6350d4eb8f713202.png

https://www.forbes.com/sites/johnmauldin/2017/10/10/your-pension-is-a-lie-theres-210-trillion-of-liabilities-our-government-cant-fulfill/#6ea70bdb65b1 

Share this post


Link to post
Share on other sites
Sign in to follow this  
Followers 0