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The Debt To GDP Ratio For The Entire World: 286 Percent
The Debt To GDP Ratio For The Entire World: 286 Percent
Did you know that there is more than $28,000 of debt for every man, woman and child on the entire planet? And since close to 3 billion of those people survive on less than 2 dollars a day, your share of that debt is going to be much larger than that. If we tookeverything that the global economy produced this year and everything that the global economy produced next year and used it to pay all of this debt, it still would not be enough. According to a recent report put out by the McKinsey Global Institute entitled “Debt and (not much) deleveraging“, the total amount of debt on our planet has grown from 142 trillion dollars at the end of 2007 to 199 trillion dollars today. This is the largest mountain of debt in the history of the world, and those numbers mean that we are in substantially worse condition than we were just prior to the last financial crisis.
When it comes to debt, a lot of fingers get pointed at the United States, and rightly so. Just prior to the last recession, the U.S. national debt was sitting at about 9 trillion dollars. Today, it has crossed the 18 trillion dollar mark. But of course the U.S. is not the only one that is guilty. In fact, the McKinsey Global Institute says that debt levels have grown in all major economies since 2007. The following is an excerpt from the report…
Seven years after the bursting of a global credit bubble resulted in the worst financial crisis since the Great Depression, debt continues to grow. In fact, rather than reducing indebtedness, or deleveraging, all major economies today have higher levels of borrowing relative to GDP than they did in 2007. Global debt in these years has grown by $57 trillion, raising the ratio of debt to GDP by 17 percentage points (Exhibit 1). That poses new risks to financial stability and may undermine global economic growth.
…click on the above link to read the rest of the article…
The Next 94 Days Could Be Bad for Your Wallet
The Next 94 Days Could Be Bad for Your Wallet
The Longest, Deepest Depression in US History
Yesterday’s good news was that there will be no 25-year recession. “We should be so lucky,” is the way a New Yorker might react. Because the bad news is much worse. The logic of the “long depression” is simple. Aging populations, debt, zombification – all of which slow growth.
How many old people and zombies do you need before an economy comes to a halt? Nobody knows. But the drag from debt is observable and calculable. Over the last three decades, approximately $33 trillion in excess debt has been contracted – above and beyond the traditional ratio to income – in America alone. And growth rates have fallen in half.
That’s because dollars that would otherwise support current spending are instead used to pay for past spending. Our old debts have to be retired with current income. The money doesn’t disappear, of course. Some goes to creditors who spend it. Some comes back as capital investment, which is a form of spending. But as credit shrinks, generally, so does the economy.
Howling, whining and finger-pointing are well-worn traditions. Especially when the question is where the money disappeared to and whodunnit.
Cartoon by Thomas Nast
And that brings us to the impossible situation we’re in now. In order to get back to a healthy ratio – say approximately $1.50 worth of debt for every $1 in income – you’d need to erase all that excess that has already been contracted. In other words, you’d have to take $1 trillion out of the consumer economy every year for the next 33 years.
It would be the longest and deepest depression in US history.
…click on the above link to read the rest of the article…
There Will Be No 25-Year Depression
There Will Be No 25-Year Depression
Good and Bad News
Today, we have bad news and good news. The good news is that there will be no 25-year recession. Nor will there be a depression that will last the rest of our lifetimes.
The bad news: It will be much worse than that. On Monday, the Dow rose another 43 points. Gold seems to be working its way back to the $1,200 level, where it feels most comfortable.
“A long depression” has been much discussed in the financial press. Several economists are predicting many years of sluggish or negative growth. It is the obvious consequence of several overlapping trends and existing conditions.
Newspaper from October 24 1929, a.k.a. “Black Thursday” – at this point, the panic had just begun with the market losing 11% in one day. On the next two trading days (Friday and Saturday – at the time, the market was open on Saturdays) the market rebounded slightly, then came “Black Monday” and “Black Tuesday”, which erased all doubt about the seriousness of the situation
Old People Are Dead Wood
First, people are getting older. Especially in Europe and Japan, but also in China, Russia and the US. As we’ve described many times, as people get older, they change. They stop producing and begin consuming.
They are no longer the dynamic innovators and eager early adopters of their youth; they become the old dogs who won’t learn new tricks.
Nor are they the green and growing timber of a healthy economy; instead, they become dead wood. There’s nothing wrong with growing old.
There’s nothing wrong with dying either, at least from a philosophical point of view. But it’s not going to increase auto sales or boost incomes – except for the undertakers.
…click on the above link to read the rest of the article…
Richard Duncan: The Real Risk Of A Coming Multi-Decade Global Depression
Richard Duncan: The Real Risk Of A Coming Multi-Decade Global Depression
Richard Duncan, author of The Dollar Crisis and The New Depression: The Breakdown Of The Paper Money Economy, isn’t mincing words about the risks he sees ahead for the world economy.
Essentially, he sees the past 50 years of economic prosperity fueled by globalization and easy credit in serious danger of being unwound, as the doomed monetary policies currently being pursued by the word’s central banks result in a massive multi-decade depression that spans the globe.
The first version of The Dollar Crisis, the hardback, came out in 2003, so I wrote it in 2002. And at that time, the dollar against gold was $300. So the dollar has lost more than 75% of its value since The Dollar Crisis was written, and I don’t think it’s going to stop here. I expect it to continue to lose value over the years and decades ahead.
But what we’re seeing is that the real theme of The Dollar Crisis was that the post-Bretton Woods international monetary system was fundamentally flawed because it couldn’t prevent trade imbalances between countries. And the US had developed an enormous trade deficit with the rest of the world and this blew the trade surplus countries like Japan and China into bubbles. And then, the dollars boomeranged back into the United States and blew it into a bubble, as well. I didn’t know when the housing bubble was going to pop in the US but I knew it would. And I wrote in The Dollar Crisis that when it did, we would have a severe global economic recession/depression that would involve a systemic banking sector crisis in the United States and necessitate trillion-dollar budget deficits and unorthodox monetary policy to prevent a Great Depression from occurring.
…click on the above link to read the rest of the article…
I WILL NOT HAVE A DEPRESSING DEPRESSION
I WILL NOT HAVE A DEPRESSING DEPRESSION
With the world careening towards great change, challenges and chaos, there is no shortage of links and lists to help us toughen up and get prepared to stay healthy, alert and nimble. But at the end of the day it is our own ‘self’, our mind we are alone with. It is here where fear creeps to the forefront and the darkness which is the unknown future appears so menacing.
Many who are making big changes to their lifestyle express the anger and frustration of not being able to shake friends and family awake, myself included. The adjustments I make will probably allow me to continue to be warm and fed, but leave me wallowing in what I think of as an advance case of ‘survivor’s guilt’. Knowing there will be extreme suffering and loss for everyone, loved ones and strangers alike, if the bottom falls out, how am I to reconcile this contradiction and seek my own happiness?
It is said misery loves company. And it is the rare person who doesn’t resent others basking in a happy disposition while their world seems to be falling apart. So is it wrong to be happy these days? Does it make it more acceptable to others and ourselves if we call it contentment or inner peace instead?
People have a difficult enough time finding happiness in what are generally perceived to be good times. So imagine what happens when fear sets in as the general population beings to recognize that the image of life as it was sold to them is not real and most certainly unattainable. How many people will be thinking about being happy then? Will those who seem to be happy be resented and despised for it? Should we also make ourselves miserable, or fake that we are, in order to appease those who are not?
…click on the above link to read the rest of the article…
Birth Pangs Of The Coming Great Depression
Birth Pangs Of The Coming Great Depression
The signs of the times are everywhere – all you have to do is open up your eyes and look at them. When a pregnant woman first goes into labor, the birth pangs are usually fairly moderate and are not that close together. But as the time for delivery approaches, they become much more frequent and much more intense. Economically, what we are experiencing right now are birth pangs of the coming Great Depression. As we get closer to the crisis that is looming on the horizon, they will become even more powerful. This week, we learned that the Baltic Dry Index has fallen to the lowest level that we have seen in 29 years. The Baltic Dry Index also crashed during the financial collapse of 2008, but right now it is already lower than it was at any point during the last financial crisis. In addition, “Dr. Copper” and other industrial commodities continue to plunge. This almost always happens before we enter an economic downturn. Meanwhile, as I mentioned the other day, orders for durable goods are declining. This is also a traditional indicator that a recession is approaching. The warning signs are there – we just have to be open to what they are telling us.
And of course there are so many more parallels between past economic downturns and what is happening right now.
For example, volatility has returned to the markets in a big way. On Tuesday the Dow was down about 300 points, on Wednesday it was down another couple hundred points, and then on Thursday it was up a couple hundred points.
This is precisely how markets behave just before they crash. When markets are calm, they tend to go up. When markets get really choppy and start behaving erratically, that tells us that a big move down is usually coming.
At the same time, almost every major global currency is imploding. For much more on this, see the amazing charts in this article.
…click on the above link to read the rest of the article…
Birth Pangs Of The Coming Great Depression
Birth Pangs Of The Coming Great Depression
The signs of the times are everywhere – all you have to do is open up your eyes and look at them. When a pregnant woman first goes into labor, the birth pangs are usually fairly moderate and are not that close together. But as the time for delivery approaches, they become much more frequent and much more intense. Economically, what we are experiencing right now are birth pangs of the coming Great Depression. As we get closer to the crisis that is looming on the horizon, they will become even more powerful. This week, we learned that the Baltic Dry Index has fallen to the lowest level that we have seen in 29 years. The Baltic Dry Index also crashed during the financial collapse of 2008, but right now it is already lower than it was at any point during the last financial crisis. In addition, “Dr. Copper” and other industrial commodities continue to plunge. This almost always happens before we enter an economic downturn. Meanwhile, as I mentioned the other day, orders for durable goods are declining. This is also a traditional indicator that a recession is approaching. The warning signs are there – we just have to be open to what they are telling us.
And of course there are so many more parallels between past economic downturns and what is happening right now.
For example, volatility has returned to the markets in a big way. On Tuesday the Dow was down about 300 points, on Wednesday it was down another couple hundred points, and then on Thursday it was up a couple hundred points.
This is precisely how markets behave just before they crash. When markets are calm, they tend to go up. When markets get really choppy and start behaving erratically, that tells us that a big move down is usually coming.
At the same time, almost every major global currency is imploding. For much more on this, see the amazing charts in this article.
In particular, I am greatly concerned about the collapse of the euro. The Swiss would not have decoupled their currency from the euro if it was healthy. And political events in Greece are certainly not going to help things either. Economic conditions across Europe just continue to get worse, and the future of the eurozone itself is very much in doubt at this point. And if the eurozone does break up, a European economic depression is almost virtually assured – at least in the short term.
And I haven’t even mentioned the oil crash yet.
…click on the above link to read the rest of the article…
Try Everything by J. Bradford DeLong – Project Syndicate
Try Everything by J. Bradford DeLong – Project Syndicate.
BERKELEY – When it became clear in late 2008 that the global economy was headed toward a crash at least as dangerous as the one that had initiated the Great Depression, I was alarmed, but also hopeful. We had, after all, seen this before. And we also had a model for how to mitigate the damage; unfortunately, policymakers left it on the shelf.
For three and a half years following the start of the Great Depression, US President Herbert Hoover’s top priority was to balance the budget, trying – but ultimately failing – to restore business confidence. In 1933, newly elected President Franklin D. Roosevelt changed course, adopting a simple yet radical strategy: try everything that might boost demand, increase production, or reduce unemployment – and then keep doing the things that work.
Roosevelt abandoned attempts to balance the budget, increased the money supply, and initiated deficit spending. He took the United States off the gold standard, had the government hire workers directly, and offered loan guarantees to those in danger of losing their homes. He cartelized the oil industry and instituted aggressive antitrust policies to break up monopolies.
Read more at http://www.project-syndicate.org/commentary/global-economic-crisis-recovery-strategy-by-j–bradford-delong-2014-12#jyqXZWs7sCusIm06.99
