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Like a bad case of hemorrhoids, debt is a topic too often left out of polite
conversation. It’s a good thing then that you didn’t come here for polite conversation because, in our quest to clearly understand debt around this ball of dirt we call home, how it impacts us, if it impacts us and what it all means, we’ve had our team put together a comprehensive report on the topic.
The above introductory comments are edited excerpts from an article* by Chris Tell (capitalistexploits.at) entitled Debt Chart Porn.
Tell goes on to say in further edited excerpts:
Earlier this year the Bank of International Settlements said in its annual report that debt ratios in the developed economies have grown by 20 percentage points to 275% of GDP since the beginning of the global financial crisis. Albeit not as severe, the trend is similar in the emerging economies where debt ratios have grown with the same pace to 175% of GDP, thanks to the spillover effect of central bankers in the developed world testing their limits with low interest rate policies.
(click to enlarge)
The Bank warned that global debt levels could trigger another Lehman-style crisis, calling continued debt accumulation over successive business and financial cycles as the root (rather than the solution) of the problem.
The symptom, however, goes…back [further] than just 2007. As you can see in the charts below (taken from the Wall Street Journal), both public and private debt levels have been expanding since the early 90s.
With interest rates trending downwards for the past 30 years and eventually hitting rock bottom in late 2008, it is no wonder that the global debt levels have swollen to 200 year highs. Yep, 200 year highs!
(click to enlarge)
Although the chart above only shows the U.S. rates, the situation is similar all across the globe.
It looks like where low rates essentially validate themselves.
Just a few weeks ago, Spain, one of the Europe’s ailing economies, issued a 50-year bond at a mere 4% rate. This is Spain for God’s sake. They’re broke!
Conclusion
There are some truly crushing debt burdens lurking in full view right here and now. Debts which cannot be repaid and will not be repaid!
Personally I tend to keep on top of this sort of information, but I’ll be honest with you when I say that what our analysts have put together scared even me, and here I was under the illusion that I was adequately informed. We believe it is vital for every investor to keep an eye on those markets.
“Blessed are the young for they shall inherit the national debt.” – Herbert Hoover
Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.
*http://capitalistexploits.at/2014/09/debt-chart-porn/
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