Never before has the world faced such a serious debt crisis. Yes, in the past there have certainly been nations that have gotten into trouble with debt, but we have never had a situation where virtually all of the major powers around the globe were all drowning in debt at the same time. Right now, confidence is being shaken as debt levels skyrocket to extremely dangerous levels. Many are openly wondering how much longer this can possibly go on. [Here’s my take on the situation.]
So writes Michael Snyder (theeconomiccollapseblog.com) in edited excerpts from his original article* entitled Debt Levels Are Skyrocketing To Extremely Dangerous Levels – How Long Can This Possibly Keep Going?.
[The following article is presented by Lorimer Wilson, editor of www.munKNEE.com and the FREE Market Intelligence Report newsletter (sample here) and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.]
Snyder goes on to say in further edited (and in some cases paraphrased) excerpts:
Just consider what is going on over in Europe right now. Even the countries that have supposedly “tried austerity” continue to rack up debt at a mind blowing pace. New numbers that have just been released show that government debt-to-GDP ratios for some of the most financially troubled nations in Europe are absolutely soaring:
- Greece: 160.5%, up from 136.5% a year ago
- Italy: 130.3%; up from 123.8% a year ago
- Portugal: 127.2%, up from 112.3% a year ago
- Ireland: 125.1%, up from 106.8% a year ago
- Euro zone: 92.2%, up from 88.2% a year ago
- Spain: 88.2%, up from 73.0% a year ago
- Netherlands: 72.0%, up from 66.7% a year ago
Meanwhile, the debt-to-GDP ratio in Japan is now well past the 200% mark and continues to march upward with no apparent end in sight….
In China, the big problem is the absolutely stunning growth of private domestic debt. According to a recent World Bank report, the total amount of credit in China has risen from 9 trillion dollars in 2008 to 23 trillion dollars today…[which] is roughly equivalent to the entire U.S. commercial banking system.
According to financial journalist Ambrose Evans-Pritchard, the ratio of private domestic debt-to-GDP in China is now wildly out of control saying, “The 160pc debt ratio for China is based on a conservative measure of credit. Fitch says it is 200pc if you count all offshore vehicles, trusts, letters of credit etc. This morning China Securities Journal – an arm of the regulators – said it may really be 221pc.”
The United States ratio of federal government debt-to-GDP has shot up like a rocket since 2008 [as the chart below so dramatically illustrates].
At this point, the U.S. already has more government debt per capita than Greece, Portugal, Italy, Ireland or Spain. It is a giant mess, and yet our politicians continue to recklessly spend more money.
[If the above wasn’t bad enough,]…state and local governments all over the nation are drowning in debt too. The bankruptcy of Detroit is forcing people to come to grips with how bad things really are. Sadly, as Meredith Whitney explained the other day, there are going to be a lot more municipal bankruptcies coming down the pipeline:
“As jarring as the reality may be to accept, Detroit’s decision last week to declare bankruptcy should not be regarded as a one-off in the U.S. municipal market – which is what the bond-peddlers are now telling their clients. The aftershocks of the largest municipal bankruptcy in U.S. history will be staggering, and Detroit will set important precedents.
Municipal bankruptcies have historically been rare for a number of reasons – the states’ determination to preserve their credit ratings, their access to cheap funding and the stigma of bankruptcy – but, these days, things are very different in the world of municipal finance.
At the root of the problem is the incentive system that elected officials used to face. For decades, across the U.S., local leaders ran up tabs for future taxpayers; they promised pensions and other benefits for public employees that have strong legal protection. That has been a great source of patronage for elected officials: they can promise all sorts of future perks to loyal supporters (state and local workers) with very little accountability on the delivery of those promises.”
The overall debt level in the United States continues to grow much, much faster than our overall economy is growing. The greatest debt bubble in the history of the planet is still expanding.
How long will it be before it bursts?
That is a very good question. For now, our “leaders” appear to just be trying to keep the party going for as long as possible. They know that if they suddenly change course hard times will hit almost immediately. For example, just check out what Federal Reserve Chairman Ben Bernanke told Congress last week…”I don’t think the Fed can get interest rates up very much, because the economy is weak, inflation rates are low. If we were to tighten policy, the economy would tank.”
Nobody wants the economy to “tank”, but the truth is that the more debt that we run up, the larger our long-term economic problems become.
A growing percentage of Americans realize that something has seriously gone wrong. According to a recent Pew Research survey, 44% of all Americans believe that an economic recovery is still “a long way off”. Unfortunately, the reality of the matter is that we are already living in the “economic recovery” – this is about as good as it is going to get.
The truth is that the real storm has not even hit yet. When the debt bubble finally bursts, we are going to see economic chaos in this country unlike anything that we have ever experienced before. I hope that you are getting ready!
[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://theeconomiccollapseblog.com/archives/debt-levels-are-skyrocketing-to-extremely-dangerous-levels-how-long-can-this-possibly-keep-going (Copyright © 2013 The Economic Collapse)
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