Monday, March 10, 2014

Global Debt Tops $100 Trillion

Here is a blast from NBfPB's past...
A wise associate of mine told me during the last financial crisis, "don't worry about this crisis, during this crisis we'll sow the seeds of the next one. That is the one to worry about and prepare for." Of course, the trick to being prepared (and to making a little money) is to figure out how we sowed the seeds and thus what the next crisis will be. I don't think it is any great mystery. In my view the next crisis is the sovereign crisis, more specifically, a US sovereign debt crisis brought about by the prevailing approach of spending gobs of money (and locking in much bigger government, call it the Rahm Emmanuel UnWasted Crisis Effect) to cure what was essentially a monetray panic. We've institutionalized a response that is no longer needed and that we can't afford (we couldn't afford the pre-crisis level, but at least we had breathing room - we've since removed any breathing room). Thus, US debt will get a hefty mark down in the coming years. There is no political solution to this problem, bondholders will have to grab the reins. I think it is coming, soon, so I've been upping the "short Treasuries" piece of my portfolio. The paradigm shift is here.
This is from 2011 and the prediction hasn't gone anywhere really, but, as readers may know, I am more often too early rather than wrong.  I think debt is still the next crisis.  Apropos this, we get this today...
The amount of debt globally has soared more than 40 percent to $100 trillion since the first signs of the financial crisis as governments borrowed to pull their economies out of recession and companies took advantage of record low interest rates, according to the Bank for International Settlements.
The $30 trillion increase from $70 trillion between mid-2007 and mid-2013 compares with a $3.86 trillion decline in the value of equities to $53.8 trillion in the same period, according to data compiled by Bloomberg. The jump in debt as measured by the Basel, Switzerland-based BIS in its quarterly review is almost twice the U.S.’s gross domestic product.


Post a Comment

<< Home