Debt mountains spark fears of another financial crisis

[newthinking]

Source: Financial Times

The world is awash with more debt than before the global financial crisis erupted in 2007, with China’s debt relative to its economic size now exceeding US levels, according to a report.

Global debt has increased by $57tn since 2007 to almost $200tn — far outpacing economic growth, calculates McKinsey & Co, the consultancy. As a share of gross domestic product, debt has risen from 270 per cent to 286 per cent.

McKinsey’s survey of debt across 47 countries — illustrated in an FT interactive graphic — highlights how hopes that the turmoil of the past eight years would spur widespread “deleveraging” to safer levels of indebtedness were misplaced. The report calls for “fresh approaches” to preventing future debt crises.

“Overall debt relative to gross domestic product is now higher in most nations than it was before the crisis,” McKinsey reports. “Higher levels of debt pose questions about financial stability.”

Read more: http://www.ft.com/intl/cms/s/0/2554931c-ac85-11e4-9d32-00144feab7de.html

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Add to this the same financial instruments that buried the world economy in 2008 are BACK.

[forest444]

1. Interestingly, the most severely indebted nation isn't Greece, Italy, or Spain

But Britain. And the reason?

Derivatives. That's what makes their debt (and some others', such as some of our big 5 banks' debt) so dangerous; if enough of those bets go the wrong way, kaboom.

And guess who they'll run to when it does?

[newthinking]

4. Our financial system is also full of those derivitives.

I suspect we won't escape it, it just may come a little later here.

[forest444]

6. May God help us all,

and may the Fed always be able to paper the losses over.

Amen.

[miyazaki]

11. Check Into Cash? n/t

[MFrohike]

2. Private or public?

If they're measuring public debt, they're still doing it wrong. If they're measuring private debt, there's hope for them yet.

[forest444]

5. That would be private (70%) AND public debt,

but includes only portfolio debts (on the books).

It glaringly excludes $1.2 quadrillion in derivatives debts. That's 15 times global GDP, at current market prices.

[MFrohike]

7. Good to hear

As for the derivatives, the liability there is always hard for me to take seriously. It could be eleventy-zillion dollars and I'd feel the same. It's essentially a statement that a bunch of unregulated bets is worth at least 15x the dollar value of the combined goods and services of the world. It's just a measure of how ridiculous the financial economy has become in relation to the real economy. If that number isn't a key indicator of the desperate need to neuter finance, I just don't know what will convince people.

By the way, it's the not the absolute amount of the valuation that bothers me, but the arrogance in it. It's a statement that gambling by the wealthy is of more value than the actual work that makes their gambling possible. The money is irrelevant. After all, Congress can't run out of dollars. The arrogance and the entitlement are what infuriate me.

[forest444]

8. You're one of those people

I wish the powers-that-be could sit down and listen to at least once in a while, MFrohike.

In the meantime, we'll hope for the best. I suppose it's all we can do.

[The2ndWheel]

15. If the number could be eleventy-zillion, why wouldn't, or shouldn't, they be aroogant?

Doesn't that basically mean they can do whatever they want, and it doesn't matter?

We live in a more abstract reality than we ever have before. Look at agriculture. How many more jobs today are more valuable to do than working on a farm, if you could even get a job on a farm? Even though, everyone needs to eat, and hopefully, eat well. There are no other jobs without food.

Every step of the way, we move further away from physical reality, and more and more into our own heads and the limitless human imagination. We value the brain more than anything else. So what gets done with the brain, regardless of what it is, will be worth more.

[MFrohike]

17. That's my point

They can do exactly what they please and pass the damage off to the rest of us.

The question of value is one of the keys to what's gone wrong in our world. When I speak of the real economy, I'm talking about things like food, sanitation, housing, etc. Those are the bedrock on which the financial economy rests. The difference between the two is quite simple: the real economy is comprised of things that add value to the economy and often our lives. The financial economy, these days though not always, is comprised of things that extract value from the economy and our lives. Finance has its place, but its place is not at the head of the table.

What gets done with the brain will be more highly compensated. Whether it's worth more is a philosophical argument with very little evidence on its side. After all, the key rationale of the "knowledge economy" is that it makes the rest of the economy, other goods and services, more efficient. If it's essentially just tweaking the better mousetrap instead of actually building it, then is it really "worth" more? Sure, it's more highly compensated, primarily because of a government granted monopoly in intellectual property, but what worth, what value, does it actually have? That's an honest question, by the way. I'm asking whether so-called intellectual property is really of greater value than things like clothes, houses, food, sanitation, and the like.

[Moostache]

3. The "Cure" to this is to let the banks go under...

Allow every single one of the large conglomerates to go belly up and seize the assets of every single one of their board of directors pending trials for larceny, fraud, and in many cases, treason.

The "real" economy - that thing that used to just be "the economy" - is still out there, plodding along and gasping for the air that is the stolen wealth of the oligarchy - the TRILLIONS of dollars that have been sucked out of the economy, stashed into safe havens and shelters and used to buy "protection" from the craven and for-sale politicians across the world. IF the bets of the madmen on Wall Street and their greedy little minions doing 21 hour days making their "nut" all go belly up, then its time for tribunals, judgments and summary executions.

George Carlin said it best years ago...back when the scumbag bankers were ONLY laundering drug money and being scumbags on a slightly less intrusive level: "If you want to stop drug dealers, hang a few of the bankers laundering their money and you'll see that drug trade dry up pretty damn quick"...the cure is still the same in 2015 as it was in 1985...HANG THE GUILTY AND MAKE THEM THE EXAMPLE THAT SCARES THE REST STRAIGHT ONCE MORE...

[Kelvin Mace]

14. Let them go under, sieze them,

break them up, then place a cap on the total amount of capitalization that any bank can have, say $5 billion. Also, restrict banks to their home states.

[Wernothelpless]

19. And put the banksters in prison ...

for a long, long, long long, time ...

[Sunlei]

9. Let the banks and lenders go out of business. They lent the money & built the mountian of debt.

[blkmusclmachine]

10. No incentive to change

[RKP5637]

12. That, is the bottom line of it all. They clearly have no incentive to change, and they also

own the politicians, hence, none want to touch the third rail, so it builds and builds 'till it crashes again. It's so damn stupid and ridiculous. Greed and dishonesty are sadly highly rewarded. Crooks have clearly found a legitimate way to rob millions blind by doing what they damn well please via owning the politicians.

On a different note, look at the Koch brothers, for example, they plan to just buy the White House in 2016. Imagine, putting resources together to secure nearly one billion dollars to try to buy the White House, does that ever tell anyone how seriously fucked up we have become.

[Hoppy]

13. But the rube in the voting booth, wearing his NRA jacket doesn't get it.

He is voting for NRA, against gays, against abortion, against Big Gub'mint and so forth. He doesn't get that the gun ad he saw last week was paid for by Kock. He doesn't get that Kock doesn't give a shit about guns... rather, they want deregulation.

He doesn't know that the Kock's don't care about gays or fetuses. They care about free trade, the pipeline and getting rid of EPA. All the rubes see is the ad, "Tell Democratic congressman '......' to keep his hands off our guns."

[CrispyQ]

16. I see another bipartisan taxpayer bailout in the near future.

Like around 2016 at the changing of the guard. Just like last time, both parties will support it & we will be told it's the only way to keep everything from crashing & that it's for our own good. Wonder how big the Wall St. bonuses will be this time?

[One_Life_To_Give]

18. Why deleverage when losses can be Socialized?

Privatization of Profits with Socialization of losses. What's not to love.