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Sancho Panza

Global Debt Exceeds $100 Trillion As Governments Binge, Bis Says

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Bloomberg 9/3/14

'The amount of debt globally has soared more than 40 percent to $100 trillion since the first signs of the financial crisis as governments borrowed to pull their economies out of recession and companies took advantage of record low interest rates, according to the Bank for International Settlements. The $30 trillion increase from $70 trillion between mid-2007 and mid-2013 compares with a $3.86 trillion decline in the value of equities to $53.8 trillion in the same period, according to data compiled by Bloomberg. The jump in debt as measured by the Basel, Switzerland-based BIS in its quarterly review is almost twice the U.S.’s gross domestic product.

Borrowing has soared as central banks suppress benchmark interest rates to spur growth after the U.S. subprime mortgage market collapsed and Lehman Brothers Holdings Inc.’s bankruptcy sent the world into its worst financial crisis since the Great Depression. Yields on all types of bonds, from governments to corporates and mortgages, average about 2 percent, down from more than 4.8 percent in 2007, according to the Bank of America Merrill Lynch Global Broad Market Index.

“Given the significant expansion in government spending in recent years, governments (including central, state and local governments) have been the largest debt issuers,” according to Branimir Gruic, an analyst, and Andreas Schrimpf, an economist at the BIS. The organization is owned by 60 central banks and hosts the Basel Committee on Banking Supervision, a group of regulators and central bankers that sets global capital standards.

Austerity Measures

Marketable U.S. government debt outstanding has surged to a record $12 trillion, up from $4.5 trillion at the end of 2007, according to U.S. Treasury data compiled by Bloomberg. Corporate bond sales globally jumped during the period, with issuance totaling more than $21 trillion, Bloomberg data show.

Concerned that high debt loads would cause international investors to avoid their markets, many nations resorted to austerity measures of reduced spending and increased taxes, reining in their economies in the process as they tried to restore the fiscal order they abandoned to fight the worldwide recession.

Adjusting budgets to ignore interest payments, the International Monetary Fund said late last year that the so-called primary deficit in the Group of Seven countries reached an average 5.1 percent in 2010 when also smoothed to ignore large economic swings. The measure will fall to 1.2 percent this year, the IMF predicted.

The unprecedented retrenchments between 2010 and 2013 amounted to 3.5 percent of U.S. gross domestic product and 3.3 percent of euro-area GDP, according to Julian Callow, chief international economist at Barclays Plc in London.

The riskiest to the most-creditworthy bonds have returned more than 31 percent since 2007, according to Bank of America Merrill Lynch index data. Treasury and agency debt handed investors gains of 27 percent in the period, while corporate bonds worldwide returned more than 40 percent, the indexes show.'

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http://www.bloomberg...is-reports.html

'Global Banks’ Lending Falls 1.8% in Third Quarter, BIS Reports

Lending by global banks fell by 1.8 percent in the third quarter of 2013, as loans to other banks shrank at the fastest rate in more than a year, the Bank for International Settlements said.

Cross-border claims of banks reporting to the BIS declined by $500 billion to $28.5 trillion in the three months through September 2013, the Basel, Switzerland-based institution said in a report released today. The reduction was driven by a 2.7 percent fall in lending to other banks, extending a five-year slump that has taken out $5.7 trillion of bank funding since 2008, the BIS said.

"The 2007–09 global financial crisis and the subsequent euro area financial strains have left a profound imprint on international interbank funding," the BIS, record-keeper of the world's central banks, said in its quarterly report. "While this contraction affected most countries worldwide, it was largest for borrowers in Europe, especially the euro area." The decline in interbank lending comes as regulators discourage wholesale borrowing and move to rules that will require creditors to take losses when banks are rescued. Lenders also still harbor doubts about their peers' asset quality and central banks continue to step in with unprecedented liquidity as they did when strains in global banking first appeared in 2007.

Parent Funding

The biggest reason for the drop in bank lending in the third quarter of 2013 was a reduction of "inter-office positions," or lending between parent and subsidiaries of the same banking group, the BIS said. That extended a "steady decline" that started in late 2011, it said. Regionally, the retreat was most pronounced for claims on banks in the euro area, which declined by 4.2 percent, and in the U.K., which fell 7.8 percent, it said.

Lending to borrowers in emerging-market economies rose 1.7 percent, or $60 billion in total, as significant increases in a few Asian countries more than outweighed declines elsewhere.

"These developments coincided with a period of volatility in global financial markets, after announcements in May that the Federal Reserve envisaged phasing out large-scale asset purchases led to capital outflows from several emerging-market economies," the BIS said.

Lending to Chinese borrowers expanded by 8.5 percent, by 15 percent in Taiwan and by 9.3 percent in Malaysia, the latter being the biggest increase in 2 1/2 years, the BIS said. Claims on Indian, Turkish, Brazilian and eastern European borrowers declined, according to the report.'

Edited by Sancho Panza

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So who's got richer by $100tr then?

the Earth of course...its got bigger and richer...

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So this is either going to end in devaluation of currencies to pay back debt in carapola, or debt writeoffs, or bail ins. Well, most pollies have no balls so in order I think it will be 1, 3, 2.....

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Corporates have record amounts stashed away.

2013 In Review, And A Look Forward

The second import thing to understand is that the other claim -- "record corporate cash" -- is true but intentionally misleading. What's also at records is corporate debt and what you must look at it is not tangible assets (which includes cash of course) but rather such assets less obligations, that is, debt. And when you do and compare against equity prices what do you see?

Let's put not-so-fine a point on it -- leverage, as expressed in the form of stock price to assets less liabilities, is at an all-time post-war high.Yes, worse than 2000 and worse than 2007.

Hmm the link I had for the above no longer works. It was from Denninger, who as I understand it, has stepped back for a while... possibly reflation and more global mega-debt solutions on mega-debt, over past few years challenging the position of mind he's long held.

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Bloomberg 9/3/14

'The amount of debt globally has soared more than 40 percent to $100 trillion since the first signs of the financial crisis as governments borrowed to pull their economies out of recession and companies took advantage of record low interest rates, according to the Bank for International Settlements. The $30 trillion increase from $70 trillion between mid-2007 and mid-2013 compares with a $3.86 trillion decline in the value of equities to $53.8 trillion in the same period, according to data compiled by Bloomberg. The jump in debt as measured by the Basel, Switzerland-based BIS in its quarterly review is almost twice the U.S.’s gross domestic product.

Borrowing has soared as central banks suppress benchmark interest rates to spur growth after the U.S. subprime mortgage market collapsed and Lehman Brothers Holdings Inc.’s bankruptcy sent the world into its worst financial crisis since the Great Depression. Yields on all types of bonds, from governments to corporates and mortgages, average about 2 percent, down from more than 4.8 percent in 2007, according to the Bank of America Merrill Lynch Global Broad Market Index.

“Given the significant expansion in government spending in recent years, governments (including central, state and local governments) have been the largest debt issuers,” according to Branimir Gruic, an analyst, and Andreas Schrimpf, an economist at the BIS. The organization is owned by 60 central banks and hosts the Basel Committee on Banking Supervision, a group of regulators and central bankers that sets global capital standards.

Austerity Measures

Marketable U.S. government debt outstanding has surged to a record $12 trillion, up from $4.5 trillion at the end of 2007, according to U.S. Treasury data compiled by Bloomberg. Corporate bond sales globally jumped during the period, with issuance totaling more than $21 trillion, Bloomberg data show.

Concerned that high debt loads would cause international investors to avoid their markets, many nations resorted to austerity measures of reduced spending and increased taxes, reining in their economies in the process as they tried to restore the fiscal order they abandoned to fight the worldwide recession.

Adjusting budgets to ignore interest payments, the International Monetary Fund said late last year that the so-called primary deficit in the Group of Seven countries reached an average 5.1 percent in 2010 when also smoothed to ignore large economic swings. The measure will fall to 1.2 percent this year, the IMF predicted.

The unprecedented retrenchments between 2010 and 2013 amounted to 3.5 percent of U.S. gross domestic product and 3.3 percent of euro-area GDP, according to Julian Callow, chief international economist at Barclays Plc in London.

The riskiest to the most-creditworthy bonds have returned more than 31 percent since 2007, according to Bank of America Merrill Lynch index data. Treasury and agency debt handed investors gains of 27 percent in the period, while corporate bonds worldwide returned more than 40 percent, the indexes show.'

yup and the alcoholics are running the brewery

...the piss-up they've organised is so major that the hangover is going to be monumental(not to mention one or two being taken to casualty with alcohol poisoning)

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It always was a government debt crisis.

What's the money been spent on? Can you see the benefits?

Now lets wait for the consequences. I Guarentee, house prices will crash, along with everything else.

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