Friday, Jul 17, 2015

The Bankruptcy Of The Planet Accelerates – 24 Nations Are Currently Facing A Debt Crisis And And The

Investment Watch Blog: Full Blown Global Debt Crisis

There has been so much attention on Greece in recent weeks, but the truth is that Greece represents only a very tiny fraction of an unprecedented global debt bomb which threatens to explode at any moment. As you are about to see, there are 24 nations that are currently facing a full-blown debt crisis, and there are 14 more that are rapidly heading toward one. Right now, the debt to GDP ratio for the entire planet is up to an all-time record high of 286 percent, and globally there is approximately 200 TRILLION dollars of debt on the books.

Posted by lvmreader @ 11:02 AM (12411 views)
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1. icarus said...

In 2000 the global derivatives 'market' was $4 trillion. In 2008 it was $585 trillion. Now it's $1.5 quadrillion. Nothing was reformed after the crash - there's more leverage than ever. Many banks are 'holding' - gambling with - 30-40 times their assets. It's not as simple as 'for every debtor there's a creditor' - with no pricing mechanism, the derivatives distributed across financial institutions could once again be shown to be junk, causing investors to flee.

And of course it gets worse as debtors fight debt with debt. Most of the measures by China to counter the recent big fall in its stock markets involve money printing or borrowing to support these markets or using (indebted) central and local government funds to buy stock. And the previous rise in these markets was fuelled by margin buying (borrowing to buy shares with the collateral of previously bought shares - then margin calls force those borrowers to find real money, i.e. the shares that they need to sell). Other government measures include preventing,or making difficult, the sale of certain kinds of stock, and anti-'shorting' rules. Investors know these are desperate measures, so....And US stock markets are heavily supported by stock buybacks using borrowed money to boost share prices and exec salaries.

China is just one of the debt-deflation stories. Will investors find other assets to inflate, or, given the heightened potential for derivatives fibrillation, will they pocket the money and run, 2008-style? Central banks have used up their ammo, so next time it's bank bail-ins, using your deposits in return for their damaged stock.

Friday, July 17, 2015 12:36PM Report Comment

2. Rob Mk said...

Icarus makes a good technical reasoning for this being a problem and it is.
But Bahhh, seen this all before. Round and round it goes, where will it stop nobody knows.
Bankruptcy is simply saying I don't trust you anymore, that's all.
They can not all go bust as then no one would be able to make money, the system won't let that happen.
So really is this a problem, just click yes to give more credit or move a decimal.......

So its is all about trust, you trust someone will exchange your money (IOU's) for a service, product or gold.
All debt could disappear tomorrow, but no one would trust the system then.

As the whole banking system is based on the fundamental understanding that there is more money in circulation than there is gold. Money (the GBP) is just an IOU for some gold. Money in the bank does not even exist it was a written number or now a digital number

A run on the banks is everyone saying I don't trust you, I'll have my IOU's now please and ultimately I'll have my gold please.

I over simplify this to make a point, game of chicken anyone?

Now if we talk of attempts to gain land to grow food or get fresh water a bit more space then that is another issue and something we should watch and worry about.

Friday, July 17, 2015 01:19PM Report Comment

3. icarus said...

Rob - Fiat money is not backed by gold or any other physical commodity. That's why it's so called.

"They can not all go bust...." but depressions and 2007-8 can happen.

"All debt could disappear tomorrow", yes, but it won't.....the creditors are in charge (see Greece, though you could argue that pressures for Greece staying in the euro - or the EU - is really about US/NATO wanting to prevent its having closer ties with Russia).

Friday, July 17, 2015 07:09PM Report Comment

4. quiet guy said...

"Just consider what Egon von Greyerz recently told King World News…"

Greyerz is a gold bug who has been preaching that gold will rise rapidly for years now. Anybody following his advice would be nursing hefty losses.

The article fails to distinguish between fully sovereign nations with their own currency and the poor souls in the Eurozone.

Saturday, July 18, 2015 10:32AM Report Comment

5. libertas said...

Actually, 24 out of almost 300 is probably quite average.

Sunday, July 19, 2015 09:16PM Report Comment

6. britishblue said...

The reason why Greece is not allowed to exit from the Eurozone is not because of the Greek debt of 350 billion, It is because the Greek debt has been repacked and sold as derivatives and sold 30 to 40 times over. Therefore letting Greece exit would set of a chain reaction around the World. It has nothing to do with the Greeks paying back the debt, they will never be able to. It will cost far more to continue bail out packages, but compared to what could happen if the derivatives went up in smoke, its the only game in town for the European masters.

Doctor Paul Craig Roberts predicted two weeks ago before the Greek vote that if the tried to exit the PM would be threatened with his life. Its seems very, very odd after winning a 61% vote for an end to the measures enacted by the Troika that he capitulated in such a manner and looks a broken man. This debt has to be continually kicked down the road.

Sunday, July 19, 2015 10:23PM Report Comment

7. hpwatcher said...

Greyerz is a gold bug who has been preaching that gold will rise rapidly for years now. Anybody following his advice would be nursing hefty losses.

That really depends upon your time scale!

Monday, July 20, 2015 03:39PM Report Comment

8. hpwatcher said...

In 2000 the global derivatives 'market' was $4 trillion. In 2008 it was $585 trillion. Now it's $1.5 quadrillion. Nothing was reformed after the crash - there's more leverage than ever.

I'm getting a headache.

Monday, July 20, 2015 03:40PM Report Comment

9. Rob Mk said...

No. 8 me too, so I'm off home to stroke the cats (yes cats) as its free and relaxing, well except I messed up and am paying rent and not a cheaper mortage. Oh I do lament not buying all those years ago.....

The movie Oh Brother where art thou? sums it up nicely.....
'Its all about the money boys', and that 'hard times flush to chump'.
Shame a lot of innocents will get hurt as well though.
toodle pip

Monday, July 20, 2015 03:57PM Report Comment

10. libertas said...

BUT, when interest rates go negative, these debts become ASSETS. Greece should pile on as much debt as possible, and soon, when European debts go negative, they will start to get payments for their debt! All Greece needs to achieve this is lobby for a debt union, so that it pays, or gets paid German level interest rates.

Crazy to say, but that ACTUALLY is the plan, and ACTUALLY is how Alabama breaks even in the States.

Monday, July 20, 2015 05:30PM Report Comment

11. icarus said...

Forget Google. Ask libertas.

Monday, July 20, 2015 06:27PM Report Comment

12. nickb said...

congratulations Libertas, you are setting new standards in economic confusion daily.

Tuesday, July 21, 2015 08:30AM Report Comment

13. hpwatcher said...

Forget Google. Ask libertas.

That view is now fairly widespread among a number of commentators. I still think deflation is a temporary effect, inflation offers the only realistic mechanism for governments to keep themselves solvent and get rid of the debt.

Talk of interest rate rises are complete rubbish, it's only done to fool bond holders into holding the lousy government debt, and not dump it. More QE & inflation is the [predictable and inevitable] outcome, it's the black swan events that will provide the entertainment along the way.

Tuesday, July 21, 2015 09:32AM Report Comment

14. icarus said...

'Talk of interest rate rises are complete rubbish'

Of course interest rate rises are on the way - we've told by Carney and the Fed several times over the past two years that rises are coming soon, so it must be true. In fact, the rises will come just as soon as central bankers think that the 'recovery' is, er, more firmly established.

Tuesday, July 21, 2015 04:55PM Report Comment

15. bidin'matime said...

I tend to agree that governments will do all they can to stimulate inflation - we've had money printing and now, to give the other side a push, we have the mandatory 'living wage'.

However, all this is at odds with all the talk about 'austerity' and cuts; I realise that they are hardly cutting anything at the moment, but talk of cuts and austerity tends to depress markets; added to which we have restrictions over several years on public sector pay rises.

Clearly they are trying to walk a knife edge - one that will become more unstable as we go on and one that risks disaster: on the monetary side they are pursuing polices that ought to create runaway inflation, while on the other, they are preventing that by sucking life out of the economy. Instead of building an economy based on the markets, we have a command economy - where the 'command' is over the market for money - and we know that command economies gradually become less and less efficient, until they fail miserably.

Tuesday, July 21, 2015 05:25PM Report Comment

16. hpwatcher said...

Of course interest rate rises are on the way - we've told by Carney and the Fed several times over the past two years that rises are coming soon, so it must be true. In fact, the rises will come just as soon as central bankers think that the 'recovery' is, er, more firmly established.

0.25% rise in US interest rates, would add around 45 billions to the size of US government debt interest payments - and the number increases much larger with successive rises. I don't think they are going to be doing that anytime soon...moreover the dollar is too strong.

The only think they can do now is talk.

Wednesday, July 22, 2015 08:56AM Report Comment

17. icarus said...

My comment @13 (should have read 'we've been told...') was of course sarcastic. And real interest rates are becoming more negative as inflation becomes more and more re-defined.

Regarding sovereign bond holders (@12) their yield may be less negative (especially relative to safety, given that the Fed especially can print money to pay off debts) than other places to park money. And of course low yield means some capital gain on bond price. The Libor scandal showed the lengths that banks (very possibly with US/UK central banks turning a blind eye, especially since it helped their low-IR policies) will go to keep IRs down. And that scam was supplemented by the sale by banks of oodles of IR swaps to short IRs (and to defraud the likes of municipalities, especially in the US, who were advised by the banks to bet the wrong way on future IRs).

Banks are keeping IRs down in order to shore up the value of floating-rate debt instruments on their books and thus to give bank balance sheets a healthy look.

And legislators, regulators etc. know that letting IRs rise will cause possible mayhem. If bank balance sheets are shredded governments have to worry about the cost of government deposit insurance, the damage to wealth held in bond funds (as bond prices fall) and to real estate markets and of course the cost of new government debt.

And the less well-off are on side in all this. The average householder sees his real estate interest in the same light as the big landowners, and his investments in pension and insurance funds that provide funds for bankster games are at risk if there's a wobble or a collapse. "The harm to people from collapse exceeds the harm in lost interest from fixing low IRs in order to forestall collapse" is the motto.

Wednesday, July 22, 2015 10:50AM Report Comment

18. libertas said...

Watching gold prices, other commodity prices and oil, it looks like the recent plateaux in prices has ended. Deflation is about to go into its final death throw that could take a while. This will happen until rates go negative because this form of default is the only thing that can turn the economy of the world around, negative rates and dirt cheap commodities.

Governments have been trying to avoid deflation, but it is the cure.

And Britain is very well placed to prosper.

Wednesday, July 22, 2015 11:09PM Report Comment

19. Jammin35 said...

"Deflation is the cure"
Deflation in EVERYTHING except house prices?
In a world in which everything gets cheaper, why do we think house prices would not?

Thursday, July 23, 2015 08:26AM Report Comment

20. icarus said...

"The only thing that can turn the economy of the world around" is investment in real goods and services and the increase in demand which is the pre-condition of this. Policies that prioritise enabling asset owners to take a 'what we have we hold' position won't do this.

Friday, July 24, 2015 09:27AM Report Comment

21. jack c said...

Interesting that this article posted last Friday has picked up 4000 plus views but no other articles posted since, I cant recollect that happening before ! HPC now in hibernation over the Summer months ?

Friday, July 24, 2015 10:52AM Report Comment

22. p. doff said...

Actually Jack, this site naughtily registers 3 views for each single view! Still well over 1000 though.

Friday, July 24, 2015 11:50AM Report Comment

23. jack c said...

p. doff (Friday, July 24, 2015 11:50AM) - thanks for the information, big hit for any article these days even on a reduced count.

On a personal note are you still doing a bit of surveying or have you permanently hung up your pen and report pad ?

Friday, July 24, 2015 12:47PM Report Comment

24. bidin'matime said...

@ jack c: yes, as a 'regular reader' I too had noticed the 'stagnation' of postings - in nearly 10 years I've been reading this blog, I don't think we've ever gone a whole week without a new posting. I commented the other day on the fact that the readership has also fallen dramatically.

Perhaps ever the optimist, I take this as a sign that we're approaching the point when 'the last bear has turned bull' - ie a sign of impending collapse. It certainly seems that the market is back at the frothy pre-crisis levels. Indeed, 'er indoors' is looking more seriously now - and both of the two houses she wanted us to look round were withdrawn - one because the vendor (who'd bought it as a foot-hold while working overseas) had decided not to sell after all, and the second because the vendor had lost the house they were after. Hardly the 'snatch your hand off' response that we'd hoped being cash buyers would produce... But if it's any consolation to you guys, you can bet your lives that the market will indeed collapse if and when we finally do buy!

Friday, July 24, 2015 05:41PM Report Comment

25. p. doff said...

@ 21
Occasionally get out the surveyors ladders Jack ...but only for personal use! Still interested in the property market though so dip into this site from time to time. Mrs Doff has also recently retired although neither of us is old enough to get the state pension yet.

Friday, July 24, 2015 07:57PM Report Comment

26. jack c said...

@bidin'matime (Friday, July 24, 2015 05:41PM) my Son & Daughter in their mid 20's both started to have a serious look at buying in the latter part of 2014/early part of 2015 but fortunately (IMO) decided against paying the over inflated prices for a "shoe box". I think we are close to 'the last bear has turned bull' situation. I fully expect a re-set of house prices before the end of the decade.

@p. doff (Friday, July 24, 2015 07:57PM) Good to see you still dip in from time to time - enjoy your retirement(s)

PS if your are looking for a catalyst to precipitate falls in the UK keep watching China

Saturday, July 25, 2015 09:29AM Report Comment

27. bidin'matime said...

@ jack c: Thanks for your feedback - having dissuaded my son and his wife (now approaching mid 30's) from buying in London five years or so ago, I have to live with the knowledge that the bubble there continues to expand - and the fact that the house they rented (instead of buying similar) recently changed hands for nearly double what the owner paid for it in 2006 (the year after we 'bailed out'...) So I've stopped advising anyone to do (or not to do) anything when it comes to property...

Saturday, July 25, 2015 06:34PM Report Comment

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