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Illustration of the earth with the land in the shape of a percent sign. — Illustration: Brendan Lynch/Axios

Staggeringly high government debt levels around the globe may stick — a huge shift from previous years that could come despite the warnings of economic damage this dynamic may cause.

Why it matters: Aging populations, worsening partisanship, steepening interest rates and other factors could make it less feasible for governments to reduce their debt — even if they want to.

What they’re saying: “[D]ebt reduction, while desirable in principle, is unlikely in practice,” International Monetary Fund economist Serkan Arslanalp and University of California, Berkeley, professor Barry Eichengreen write in a new paper.

Ballooning government debt worldwide won’t decline significantly in the coming years as in decades past, they argue. “Countries are going to have to live with this new reality as a semipermanent state.”

Details: The paper, presented Saturday before global central bankers and leading economists at the Kansas City Fed’s Jackson Hole conference, says a collision of new forces will make it difficult to trim debt.

Demographics: Aging populations mean governments must spend more on health care and pensions.
Green transition: In the U.S. and elsewhere, governments are ramping up spending to finance the transition to a greener economy.
Interest rates: Higher borrowing costs mean any growing debt load will get even more expensive to service. (Meanwhile, inflating the debt away is not a “sustainable route to reducing high public debts,” the authors note.)
Politics: Political polarization and divided government make long-lasting policy arrangements to trim the debt— raising taxes or cutting spending— “even more challenging than in the past,” the authors write.

Of note: Stronger-than-expected economic growth — caused by, say, a larger increase in productivity — could stabilize debt-to-GDP ratios.

…click on the above link to read the rest…

March of Folly: Fall of American Empire

February 21, 2023

MARCH OF FOLLY: FALL OF AMERICAN EMPIRE

“Folly is a child of power.” ― Barbara W. Tuchman, The March of Folly: From Troy to Vietnam

“A phenomenon noticeable throughout history regardless of place or period is the pursuit by governments of policies contrary to their own interests. Mankind, it seems, makes a poorer performance of government than of almost any other human activity. In this sphere, wisdom, which may be defined as the exercise of judgment acting on experience, common sense, and available information, is less operative and more frustrated than it should be. Why do holders of high office so often act contrary to the way reason points and enlightened self-interest suggests? Why does intelligent mental process seem so often not to function?” ― Barbara W. Tuchman, The March of Folly: From Troy to Vietnam

The term “folly” is particularly apt at this stage in the decline of the great American empire. Folly is defined as: criminally or tragically foolish actions or conduct; an excessively costly or unprofitable undertaking. If ever a word captured the actions of American political leaders in the 21^st Century and reflect the tragic downfall of an empire borne out of the ashes of the Second World War, it is the term “folly”.

For the last two decades I’ve been befuddled by the inane foolishness of our leaders, as they have driven the nation into a bottomless pit of debt at an astoundingly ridiculous pace, initiated military conflict across the globe, and in the last three years initiated anti-human policies guaranteed to destroy our economic system, depopulate the planet, increase human suffering, and turn the world into a techno-gulag where we will own nothing, eat bugs, and bow down to the commands of globalist overlords.

…click on the above link to read the rest…

Central Banks, Global Debt & COVID

July 26, 2022

Central Banks, Global Debt & COVID

Ed Dowd summarizes his career and insights as a successful stock picking “conspiracy theorist”.

I first met Ed Dowd during an early trip which a group of physicians from the International Alliance of Physicians and Medical Scientists (www.globalcovidsummit.com) made to the Hawaiian Islands of Maui and Oahu during the fall of 2021. The primary purpose of the trip was to support our physician colleagues Dr. Kirk Milhoan (MD, PhD- Pediatric Cardiologist) and Lorrin Pang (MD, MPH- Maui County Public Health Officer), who were embroiled in an effort by local press and politicians to take their medical licenses for the perceived infraction of supporting early COVID treatment and (in the case of Lorrin) relying on his own evaluation and interpretation of the safety and effectiveness of the COVID-19 genetic vaccines. The particular grievance concerning Lorrin seemed to have revolved around his reservations concerning the lack of data demonstrating safety of SARS-CoV-2 genetic vaccination during pregnancy. After many long months subjected to the usual defamation and derision in local corporate-controlled media, both were eventually exonerated. No final action was taken against them by the Hawaiian medical board, although both were deeply impacted by the experience, and I suspect will forever be more guarded and defensive in their medical practices.

It was during a local group dinner and fundraiser for the cause, held on the island of Maui, that Ed and his colleagues first introduced themselves to me. To my surprise, they indicated that they had authored a document which they named “The Malone Doctrine”. Taken aback, as neither Jill nor I had contributed in any way, I asked why they were using this name. Ed and his colleagues told me that “we have read and listened to everything you have said and written during COVID, and this is what is written in the white spaces between every line”…

…click on the above link to read the rest of the article…

Global Debt approaching $280 Trillion by Year-end.

November 28, 2020

Global Debt approaching $280 Trillion by Year-end.

Global debt is exploding thanks to the deliberate COVID-19 manufactured crisis. It is approaching $280 trillion going into year-end. We should no longer call it even debt because at this point, they are just creating the money and the central banks are buying it. Moreover, there is ABSOLUTELY no intention whatsoever to pay back anything.

Here is Trudeau, PM of Canada, who completely misrepresents the debt, and refuses to answer the question simply saying interest rates are at historic lows. They have created this crisis in order to default on the debt using the Coronavirus scam as their excuse. I cannot stress enough, GET OUT OF ALL GOVERNMENT DEBT ON ALL LEVELS – PERIOD!

Meanwhile, Trudeau has committed Canada to the World Economic Forum’s Agenda 2030.

Weekly Commentary: Scorched Earth

November 27, 2020

Weekly Commentary: Scorched Earth

November 18 – Reuters (Rodrigo Campos): “Global debt is expected to soar to a record $277 trillion by the end of the year as governments and companies continue to spend in response to the COVID-19 pandemic, the Institute of International Finance said in a report… The IIF… said debt ballooned already by $15 trillion this year to $272 trillion through September. Governments – mostly from developed markets – accounted for nearly half of the increase. Developed markets’ overall debt jumped to 432% of GDP in the third quarter, from a ratio of about 380% at the end of 2019. Emerging market debt-to-GDP hit nearly 250% in the third quarter, with China reaching 335%, and for the year the ratio is expected to reach about 365% of global GDP.”

Covid’s precision-like timing was supernatural – nothing short of sinister. A once in a century international pandemic surfacing in the waning days of an unrivaled global financial Bubble. A historic experiment in central bank monetary management already floundering (i.e. Fed employing aggressive “insurance” QE stimulus with stocks at record highs and unemployment at 50-year lows). A Republican administration running Trillion-dollar deficits in the midst of an economic boom. Yet, somehow, reckless U.S. fiscal and monetary stimulus appeared miserly when compared to the runaway excess percolating from China’s epic Credit Bubble. Monetary, fiscal, markets, at home and abroad: Covid bestowed end-of-cycle excess a hardy additional lease on life.

From the FT: “Global debt rose at an unprecedented pace in the first nine months of the year as governments and companies embarked on a ‘debt tsunami’ in the face of the coronavirus crisis… From 2016 to the end of September, global debt rose by $52tn; that compares with an increase of $6tn between 2012 and 2016.”
…click on the above link to read the rest of the article…

World Bank Warns “Wave Of Debt” Could Unleash Historic Crisis, Crush The Global Economy

December 22, 2019

World Bank Warns “Wave Of Debt” Could Unleash Historic Crisis, Crush The Global Economy

Something happens to the world’s “really smart people” when the topic of debt is discussed: they become blabbering idiots.

Consider that last month we reported that according to the Institute of International Finance, global debt has now hit $250 trillion and is expected to rise to a record $255 trillion at the end of 2019, up $12 trillion from $243 trillion at the end of 2018, and nearly $32,500 for each of the 7.7 billion people on planet. “With few signs of slowdown in the pace of debt accumulation, we estimate that global debt will surpass $255 trillion this year,” the IIF said in the report.

Separately, Bank of America recently calculated that since the collapse of Lehman, government debt has increased by $30tn, corporates debt by $25tn, household by $9tn, and financial debt by $2tn; And with central banks expected to support government debt, BofA warns that “the biggest recession risk is disorderly rise in credit spreads & corporate deleveraging.”

Where the “really smart people” come in, is the periodic return every couple of years of the naive assumption that despite this relentless increase in global debt, central banks can tighten financial conditions and the world can sustain higher interest rates. What ends up happening is that after a few quarters of “reflation” – which ironically and circularly is critical to inflate the debt away – markets realize that higher rates on this mountain of debt are unsustainable, risk assets tumble and central banks are forced to unleash another wave of easing, in the process further Japanifying first Europe, and then the entire world.

…click on the above link to read the rest of the article…

THE GLOBAL DEBT TICKING TIME-BOMB: The Reason To Own Gold & Silver

December 22, 2019

THE GLOBAL DEBT TICKING TIME-BOMB: The Reason To Own Gold & Silver

As Global Debt reached a new record high of $250 trillion this year, gold and silver came briefly back on the radar for investors. After five long years, the precious metals finally broke through key technical levels this summer. However, after the Fed started the Repo Operations in September and the $60 billion a month of “Not-QE” in October, the focus returned once again to the Bloated Stock and Bond markets.

What a drastic change from the Fed’s policy last year when it was reducing the size of its balance sheet until the stock market crashed in December 2018. Since then, the huge stock market reversal and all the additional gains have been Fed liquidity induced. Sven Heinrich continues to write and talk about this on his website, the Northmantrader.com. Here is a recent chart from his article, System Failure:

At the bottom left hand of the chart corresponds to the bottom of the stock market in January 2019 when Fed Chairman Powell caved in by ending the reduction of the Fed’s balance sheet. Since then, there have been three rate cuts, Repo Magic and $60 billion a month of U.S. Treasury purchases because there aren’t enough suckers to absorb all the new U.S. Govt issued debt.

The U.S. economy isn’t even in a recession, and the Fed is acting as if it was 2008-2009 all over again. What happens when the U.S. economy finally rolls over?? It’s going to be terrible news, especially considering the record amount of global debt. According to the IIF, the Institute of International Finance, global debt reached a record high of $250 trillion in the first half of the year. However, the IIF estimates that global debt will reach $255 trillion by yearend.

…click on the above link to read the rest of the article…

Global Debt To Hit All Time High $255 Trillion, 330% Of World GDP

November 16, 2019

Global Debt To Hit All Time High $255 Trillion, 330% Of World GDP

There are three certainties in life: death, taxes and that global debt will keep rising in perpetuity.

Addressing the third, yesterday the Institute of International Finance reported that global debt has now hit $250 trillion and is expected to hit a record $255 trillion at the end of 2019, up $12 trillion from $243 trillion at the end of 2018, and nearly $32,500 for each of the 7.7 billion people on planet.

“With few signs of slowdown in the pace of debt accumulation, we estimate that global debt will surpass $255 trillion this year,” the IIF said in the report.

The surge was driven by a $7.5 trillion surge in the first half of the year which was used to reverse the global slowdown that sent stocks into a bear market in 2018, and which shows no signs of slowing. Around 60% of that jump came from the United States and China. Government debt alone is set to top $70 trillion this year, as will overall debt (government, corporate and financial sector) of emerging-market countries.

The total debt breakdown as of Dec. 31 is as follows:

Household debt: $47.9 trillion
Non-financial corporate: $75.7 trillion
Government: $70 trillion
Financial corporate: $61.7 trillion

And this is what the total debt picture was like at the start of the century, 20 years ago…

… and again today:

This amounts to a grand total of just over $255 trillion, roughly equivalent to a record 330% of global GDP.

WATCH: Follow the increase of global #debt over two decades.

Latest IIF Global Debt Monitor finds global debt has now surpassed a record $250T & is projected to reach $255T by the end of 2019. pic.twitter.com/D001VVzZmD— IIF (@IIF) November 14, 2019

Separately, Bank of America’s Michael Hartnett on Friday calculated that since the collapse of Lehman, government debt has increased by $30tn, corporates debt by $25tn, household by $9tn, and financial debt by $2tn; And with central banks expected to support government debt, BofA warns that “the biggest recession risk is disorderly rise in credit spreads & corporate deleveraging.”

…click on the above link to read the rest of the article…

The Global Debt Bubble Enters Its Blow-Off Stage

September 11, 2019

The Global Debt Bubble Enters Its Blow-Off Stage

People have been talking about a “debt bubble” for some years now. They’ve been right, of course, based on the combination of surging borrowing and plunging rates. But the bubble hasn’t stopped inflating, and recently it entered what certainsly looks like a terminal blow-off stage. Some highlights:

Though July, China’s total debt rose by $2 trillion, a year-over-year increase of 26%. And this month the Chinese government cut bank reserve requirements in an attempt to further rev up lending.

In Japan, the junk bond market is being constrained by banks so desperate for yield that they’re lending directly to companies previously considered too risky. See Japan Junk Bond Market Hopes Crushed by Banks Hungry to Lend.

A recent week of corporate bond issuance was “the biggest weekly volume to hit global markets on record,” according to Dealogic. US investment-grade companies raised $72 billion across 45 deals, equaling the total issued in all of August.

Numerous companies issued 30-year bonds with yields below 3%, which used to be the province of safe haven governments. Even Apple, which is sitting on an epic pile of cash, borrowed money.

At the other end of the spectrum, junk bond issuer Restaurant Brands, which owns the Popeyes and Burger King chains, sold 8.5-year bonds with a coupon under 4%, a record low yield for a US junk issuer.

In Europe sales of new bonds hit $1 trillion earlier than in any previous year. Fully a third of European investment-grade bonds (and some junk bonds) now trade with negative yields. And the ECB is expected to cut rates further at its upcoming meeting.

Why is all this happening? Three reasons:

…click on the above link to read the rest of the article…

Fourth Turning Economics

August 5, 2019

Fourth Turning Economics

“In retrospect, the spark might seem as ominous as a financial crash, as ordinary as a national election, or as trivial as a Tea Party. The catalyst will unfold according to a basic Crisis dynamic that underlies all of these scenarios: An initial spark will trigger a chain reaction of unyielding responses and further emergencies. The core elements of these scenarios (debt, civic decay, global disorder) will matter more than the details, which the catalyst will juxtapose and connect in some unknowable way. If foreign societies are also entering a Fourth Turning, this could accelerate the chain reaction. At home and abroad, these events will reflect the tearing of the civic fabric at points of extreme vulnerability – problem areas where America will have neglected, denied, or delayed needed action.” – The Fourth Turning – Strauss & Howe

The quote above captures the current Fourth Turning perfectly, even though it was written more than a decade before the 2008 financial tsunami struck. With global debt now exceeding $250 trillion, up 60% since the Crisis began, and $13 trillion of sovereign debt with negative yields, it is clear to all rational thinking individuals the next financial crisis will make 2008 look like a walk in the park. We are approaching the eleventh anniversary of this crisis period, with possibly a decade to go before a resolution.

As I was thinking about what confluence of economic factors might ignite the next bloody phase of this Fourth Turning, I realized economic factors have been the underlying cause of all four Crisis periods in American history.

Debt levels in eurozone, G7, US and Germany

The specific details of each crisis change, but economic catalysts have initiated all previous Fourth Turnings and led ultimately to bloody conflict. There is nothing in the current dynamic of this Fourth Turning which argues against a similar outcome. The immense debt, stock and real estate bubbles, created by feckless central bankers, corrupt politicians, and spineless government apparatchiks, have set the stage for the greatest financial calamity in world history.

…click on the above link to read the rest of the article…

Global Debt Hits $246 Trillion, 320% Of GDP, As Developing Debt Hits All Time High

July 15, 2019

Global Debt Hits $246 Trillion, 320% Of GDP, As Developing Debt Hits All Time High

According to the latest IIF Global Debt Monitor released today, debt around the globe hit $246 trillion in Q1 2019, rising by $3 trillion in the quarter, and outpacing the rate of growth of the global economy as total debt/GDP rose to 320%

✔

NEW Global Debt Monitor: Global debt hit $246T in Q1 2019, nearly 320% of GDP.

Debt by sector, Q1 2019 (as % of GDP):
Households: 59.8%
Gov’t: 87.2%
Financial corporates: 80.8%

This was the second-highest dollar number on record after the first three months of 2018, though debt was higher in 2016 and 2017 as a share of world GDP. Total debt was broken down as follows:

Households: 60% of GDP
Non-financial corporates: 91% of GDP
Government 87% of GDP
Financial Corporations: 81% of GDP

And while the developed world has some more to go before regaining the prior all time leverage high, with borrowing led by the U.S. federal government and by global non-financial business, total debt in emerging markets hit a new all time high, thanks almost entirely to China…

… which has been on such a debt issuance rampage, it would make even Uncle Sam blush, as Chinese corporations owed the equivalent of more than 155% of GDP in March, or nearly $21 trillion, up from about 100% of GDP, or $5 trillion, two decades ago.

And here is a startling fact: according to Fundamental Intelligence, a bond market consultancy, Chinese firms accounted for 42% of all corporate bonds issued in EMs this year, which it warned raised the risk of defaults next year and in 2021.

As a result of China’s ravenous debt appetite, emerging economies had the highest-ever level of debt (both corporate and household) at the end of Q1, both in dollar terms and as a share of their gross domestic product, according to the FT’s report on the latest IIF data.

…click on the above link to read the rest of the article…

Global Debt Surpasses 244 Trillion Dollars As “Nearly Half The World Lives On Less Than $5.50 A Day”

January 18, 2019

Global Debt Surpasses 244 Trillion Dollars As “Nearly Half The World Lives On Less Than $5.50 A Day”

The borrower is the servant of the lender, and one of the primary ways that the elite keep the rest of us subjugated is through the $244,000,000,000,000 mountain of global debt that has been accumulated. Every single day, the benefits of our labor are going to enrich somebody else. A portion of the taxes that are deducted from your paycheck is used to pay interest on government debt. A portion of the profits that your company makes probably goes to servicing some form of business debt. And most Americans are continuously making payments on their mortgages, their auto loans, their credit card balances and their student loan debts. But most people never stop to think about who is becoming exceedingly wealthy on the other end of these transactions. Needless to say, it isn’t the 46 percent of the global population that is living on less than $5.50 a day.

The world has never seen anything like this mountain of debt ever before, and one of the central themes of The Economic Collapse Blog is that all of this debt will ultimately destroy our society. According to the Institute of International Finance, the total amount of global debt is now “more than three times the size of the global economy”…

The world’s debt pile is hovering near a record at $244 trillion, which is more than three times the size of the global economy, according to an analysis by the Institute of International Finance.

The global debt-to-GDP ratio exceeded 318 percent in the third quarter of last year, despite a stronger pace of economic growth, according to a report by the Washington-based IIF released on Tuesday.

…click on the above link to read the rest of the article…

Global Debt Surpasses 244 Trillion Dollars As “Nearly Half The World Lives On Less Than $5.50 A Day”

January 16, 2019

Global Debt Surpasses 244 Trillion Dollars As “Nearly Half The World Lives On Less Than $5.50 A Day”

The world’s debt pile is hovering near a record at $244 trillion, which is more than three times the size of the global economy, according to an analysis by the Institute of International Finance.

The global debt-to-GDP ratio exceeded 318 percent in the third quarter of last year, despite a stronger pace of economic growth, according to a report by the Washington-based IIF released on Tuesday.

…click on the above link to read the rest of the article…

We Are Entering The “Quantitative Failure” Narrative

January 10, 2019

We Are Entering The “Quantitative Failure” Narrative

For a decade, the world brushed off any concerns about soaring global debt under the rug for a simple reason: between the Fed, the ECB and the BOJ, there was always a buyer of last resort, providing an implicit or, increasingly explicit backstop to bond prices, in the process creating the biggest asset bubble in history as investors seeking return were forced to buy first fixed income securities and then equities and other, even riskier securities.

However, as BofA’s Barnaby Martin is the latest to point out, “early 2019 will be uncharted territory for the market” because after years of central bank purchases crowding investors into risky assets, this dynamic will now reverse. As Zero Hedge readers have observed on countless occasions, the yearly growth of central bank balance sheets is now turning negative as shown in the following chart.

The upshot of this, in Martin’s view, is that markets will continue to experience more “corrections” than normal, leading to bigger and fatter trading ranges for credit spreads in Europe this year.

However, as recent market events demonstrated, the deteriorating liquidity backdrop will weigh on economic growth according to the BofA strategist. As the next chart highlights, global money supply has declined rapidly over the last year and a half, and in fact, global money supply growth (using M1) is flirting with the lows seen in mid-2008. This is a key observation because “while some economies, such as China, are now pivoting back to supportive measures, high global debt will constrain economies’ enthusiasm for engaging in further rounds of stimulus” Barnaby suggests. And as chart 4 suggests, lower money supply growth has often pointed to weaker global economic momentum going forward, suggesting that absent a major change, a recession is indeed inevitable as Albert Edwards will be quick to add.

…click on the above link to read the rest of the article…

Record Global Debt & Chaos in 2019 – John Rubino

January 9, 2019

Record Global Debt & Chaos in 2019 – John Rubino

Financial writer John Rubino says no matter what country, the global debt has exploded to record highs, and it’s going to go even higher in the coming years. Rubino contends, “Government debt is going to soar going forward no matter what. Whether we have three more years of growth or a recession next year, we are going to see massive new deficits and massive increases in government debt all over the world. This is coming at a time when we have already hit record levels of debt and blown right through previous record levels. The last crisis, that almost ended the global financial system, was debt driven. The next one is going to be that much, much more serious because we basically doubled the amount of debt that’s out there since 2005 and 2006.”

On the political front, Rubino says, “The idea that things get more extreme from here is not that out of the ordinary and not that hard to believe. We are not just going to see gridlock here in the U.S., we are going to see chaos. That means of the things that should be gotten done, very few of them will be. . . . Political chaos is good for precious metals . . . both metals are way undervalued.”

Few would disagree, that at some point, the financial system is going to explode. Rubino says, “Let’s look at what happens when this finally blows up. The pressure is going to be on currencies when the financial system starts to spin out of control next time. In other words, people are going to see the amount of debt we are taking on, see the amount of currency we are creating to service all this debt, and will wonder what that does to the value of the currencies that are being aggressively created. They will lose faith in those currencies.

…click on the above link to read the rest of the article…

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