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Page added on February 6, 2015
At $200 Trillion The World’s Debt Cup Overfloweth
The world economy is still built on debt.
That’s the warning today from McKinsey & Co.’s research division which estimates that since 2007, the IOUs of governments, companies, households and financial firms in 47 countries has grown by $57 trillion to $199 trillion, a rise equivalent to 17 percentage points of gross domestic product.
While not as big a gain as the 23 point surge in debt witnessed in the seven years before the financial crisis, the new data make a mockery of the hope that the turmoil and subsequent global recession would put the globe on a more sustainable path. Government debt alone has swelled by $25 trillion over the past seven years and developing economies are responsible for almost half of the overall gain.
McKinsey sees little reason to think the trajectory of rising leverage will change any time soon.
Here are three areas of particular concern:
1. Debt is too high for either austerity or growth to cure
Politicians will instead need to consider more unorthodox measures such as asset sales, one-off tax hikes and perhaps debt restructuring programs.
2. Households in some nations are still boosting debts
Eighty percent of households have a higher debt than in 2007 including some in northern Europe as well as Canada and Australia.
3. China’s debt is rising rapidly
Thanks to real estate and shadow banking, debt in the world’s second-largest economy has quadrupled from $7 trillion in 2007 to $28 trillion in the middle of last year. At 282 percent of GDP, the debt burden is now larger than that of the U.S. or Germany. Especially worrisome to McKinsey is that half the loans are linked to the cooling property sector.
via A World Overflowing With Debt – Bloomberg Business.
davidstockmanscontracorner.com
19 Comments on "At $200 Trillion The World’s Debt Cup Overfloweth"
Plantagenet on Fri, 6th Feb 2015 4:09 pm
The obama administration loaded up on debt and the Fed printed dollars after 2009. Other countries around the world are following suit. In the short run this kind of massive governmental borrowing can mask the fundamental systemic problems in the global economy, but in the long run it will be disastrous.
bobinget on Fri, 6th Feb 2015 4:36 pm
obama administration loaded up on debt and the Fed printed dollars after 2009.
President Obama was also responsible for The Great Depression, Pearl Harbor and The Vietnam War. HRH is much to polite to mention.
Rodster on Fri, 6th Feb 2015 4:36 pm
Let’s not forget the $1.5 quadrillion derivatives bubble which keeps growing.
Pops on Fri, 6th Feb 2015 4:59 pm
Actually the Fed printed no dollars, they “expanded bank credit” and bought up banks bad bets to the tune of about $4T but turned around and forced the banks to “voluntarily” deposit it back with the fed.
Net effect was not much money on the street (so no hyperinflation) improved bank reserves (now 14.5% requirement up from 5% in 2000) but lots and lots of crap in the Feds portfolio.
So Rodster is right I think, the “volker Rule” is a sham because who can tell the difference between a hedge and a bet? and with the fed loaded up with toxic paper and the banks all doing exactly what they were doing before, next little slip could be a doozy.
Plantagenet on Fri, 6th Feb 2015 5:19 pm
@bobinget
Your belief that obama is responsible for the great depression, pearl harbor and the vietnam war indicates you don’t have a very firm grasp on US history.
Cheers!
Plantagenet on Fri, 6th Feb 2015 5:28 pm
Pops—of course you are right that Fed is engaged in all kinds of financial machinations.
And always remember that in our marvelous digital age, the Fed can create money simply by borrowing and loaning funds to US and foreign banks without ever actually “printing” paper money. Its all done electronically now.
Cheers!
ghung on Fri, 6th Feb 2015 6:21 pm
It’s OK. We owe that to ourselves. Isn’t that how we spin this away? Just hit the big reset button 😉
DMyers on Fri, 6th Feb 2015 6:36 pm
I’m desensitized to large numbers. 200 trill’? Hah! Ain’t nothin.
These are simply 21st Century numbers. When we open the economic floodgates of interplanetary construction projects, which are on the trajectory of technological advancement, we will be able to pay it all back. McKinsey missed that.
Just hold on until then. Keep telling yourself: “a debt slave now, but someday I’ll be free on another planet.” It’s a very comforting mantra.
Davy on Fri, 6th Feb 2015 8:25 pm
These number have no basis in reality per the physical. They are for the most part just fictional claims on a shared wealth. I say shared because the physical wealth is one number and many times smaller than the digital claim to the physical. These size distorted digital claims to the real are in effect multiple rehypothecated claims which in effect have unknown value. Counterparty risk and dispersed risk through the multiple different financial hedging strategies and investment vehicles has in effect made all assets at risk and of unknown value. If risk levels are not really known how can a proper price be assigned an asset? We are in a time of fiction and the surreal a house built on shifting sands.
Davy on Fri, 6th Feb 2015 8:46 pm
http://www.zerohedge.com/news/2015-02-06/china%E2%80%99s-monumental-debt-trap-why-it-will-rock-global-economy
Needless to say, this stunning conclusion from one of the world’s greatest and most erudite believes in the power of money printing has enormous implications for the global economy and financial system. It means that China is the New Greece—-but one sporting 40X more GDP and 70X more debt.
Indeed, last year China spent upwards of $5 trillion on fixed asset investment—-a figure that is greater than the sum total for Europe and the US combined. Behind that towering number is an immense caravan of cement, structural steel, glass, copper and all the rest of the industrial commodities.
So when the China Ponzi finally crashes, the deflationary gales will propagate violently through the global economy and financial system. China’s $28 trillion tower of debt will come tumbling down in the process; and a world floating on $200 trillion of the stuff will not be far behind.
Go Speed Racer. on Sat, 7th Feb 2015 2:50 am
All you guys miss the big picture. We have national debt because the libs spend it on pot for l welfare bums, and the repubs spend it on bombs and wont pay their taxes.
If the rich would pay their fair amount of fax, the govt would have enough revenue to avoid debt.
EVERY Debt owed by the poor, is an asset owned by the rich. It Is wealth mis-distribution. The rich have enough excess to loan it to us. We are too poor to pay it all back. Solution, raise taxes on the rich.
markisha on Sat, 7th Feb 2015 3:18 am
print baby print
Rodster on Sat, 7th Feb 2015 4:39 am
“All you guys miss the big picture. We have national debt because the libs spend it on pot for l welfare bums, and the repubs spend it on bombs and wont pay their taxes.”
I think you’ve missed the big picture. The financial system that has been created requires exponential levels of debt, growth and population in our for the system to function. If debt levels shrink the financial system collapses.
Rodster on Sat, 7th Feb 2015 4:42 am
@ Davy
I read that article yesterday on ZH. Like I’ve saying for 2 years now, China is a mess and all their gold won’t save them when this system collapses.
fred1 on Sat, 7th Feb 2015 5:14 am
finally no one is responding to that troll plant. its only taken about 5 years be who’s counting
thingy on Sat, 7th Feb 2015 1:02 pm
Plantagenet, your fundamental non-understanding of economics and the effect on it by expensive oil is quite outstanding, congrats.
The so called right wing free market got us into this mess and Greenspan a self-confessed libertarian-republican dug us in further.
GregT on Sat, 7th Feb 2015 4:35 pm
Thingy,
Don’t feed the troll.
theedrich on Sat, 7th Feb 2015 9:32 pm
It is unclear what Thingy means by the “right wing free market” and Greenspan being a “self-confessed libertarian-republican.” Greenspan is a liar covering his tracks with obfuscation and cannot by any means be classed as a “Republican.” It is the U.S. government as a whole (both parties) that led to subpriming, to the beginning of the end (2008), and, currently, to using financial prestidigitation in an attempt to camouflage our collapse and kick the can down the road until the next election. Putin’s crafty criminality in Ukraine now appears quite likely to succeed precisely because he knows how weak our financial suicidism has made us.
Davy on Sun, 8th Feb 2015 7:00 am
Thee, good summation in a short piece on the idiocy of the two group thinks in DC. I also like your “crafty criminality” call on Putin. It has been shown Putin is a criminal, was a criminal and will be a criminal. Nearly all politicians are criminal because higher human civilization is criminality. Politicians are just the putrid cream that rises to the top of the spoiled milk.
The Ukraine is criminality of deceit and theft on both sides. Poor normal people are having their lives ripped apart from evil on both sides. That said the US and EU have no business on Russia doorstep playing games. The US and EU have no business bringing the world to the edge of the cold war abyss again. If this would have been Russia on Poland’s doorstep or even the Baltics that is another story. Russia does not belong there yet, eastern Ukraine is another story because of history and ethnic realities.
Putin is the most advanced of the global politician today. He has a vision of the multipolar globalized world breaking down and the advantage of Russia to start the new focus on Russia’s near abroad. It is still unclear whether Putin properly timed this paradigm shift in foreign policy. This timing is similar to dooming and prepping on our level. Timing is important in quitting the job and converting one’s life to post BAU. To transition whether a nation or the individual means using BAU to transition out of BAU. Is Russia’s or should I say Putin’s timing right?
The agendist Makster likes to attempt to point out how Russia, China, and the other Brics are going to bury the US and the west. Look around at these Brics and tell me do you see strength and power? NO. They are their typical mess as the rest of the developing world is. In fact the Brics are now in worse shape than when the Makster started preaching his Bric message. This is not to say the US and the west are doing well quite the contrary. The idiocy of the DC leadership and their control by the global plutocrats is shown in the MSM. If you drop below the fog of deceit of MSM you see the reality is that the entire global world is unraveling.
I am not sure if Putin picked the right time. I admire him for having the nuggets to do what is right for Russia and bold in vision. He has a grand plan that is brilliant but it is a gamble. How long will BAU dominate. How long will globalism dominate. How long will the global investor choose the time tested security of the status quo including the dollar? I have no clue but the status quo and the dollar have a shelf life and that shelf life is drawing near. Putin is the greatest of politicians today but this is scary because he is a blue eyed devil. A leader with the highest number of WMD in the world being bold that is scary.