'Wishful thinking with respect to "a golden opportunity." The global government finance Bubble has been fueled by almost a decade of near zero rates, massive central bank monetization and unprecedented amounts of government borrowing. My view holds that myriad global Bubbles have become only more vulnerable to any meaningful tightening of financial conditions. And there are pressing issues that increasingly put the loose financial landscape in jeopardy.''One thing we know with certainty: the world has added tremendous amounts of debt since the last debt crisis. And debt is poised to continue rising rapidly until sober markets impose some discipline on profligate borrowers. This is a momentous festering issue that will come to a head at some point. Ten-years of ultra-loose global finance destroyed discipline - by borrowers and lenders alike. "Deficits don't matter." In the markets, the view holds that central banks won't tolerate a problematic backup in market yields. So, as central bankers gaze submissively from the sidelines, governments just keep issuing debt and markets keep buying it.
April 18 - Bloomberg (Andrew Mayeda): "The world's debt load has ballooned to a record $164 trillion, a trend that could make it harder for countries to respond to the next recession and pay off debts if financing conditions tighten, the International Monetary Fund said. Global public and private debt swelled to 225% of global gross domestic product in 2016, the last year for which the IMF provided figures, the fund said… in its semi-annual Fiscal Monitor report. The previous peak was in 2009, according to the… fund. 'One hundred and sixty-four trillion is a huge number,' Vitor Gaspar, head of the IMF's fiscal affairs department, said… 'When we talk about the risks looming on the horizon, one of the risks has to do with the high level of public and private debt.'"
For posterity, I've pulled a few paragraphs from the
IMF's most recent Fiscal Monitor report:
"At $164 trillion-equivalent to 225% of global GDP-global debt continues to hit new record highs almost a decade after the collapse of Lehman Brothers. Compared with the previous peak in 2009, the world is now 12% of GDP deeper in debt, reflecting a pickup in both public and nonfinancial private sector debt after a short hiatus. All income groups have experienced increases in total debt but, by far, emerging market economies are in the lead. Only three countries (China, Japan, United States) account for more than half of global debt -significantly greater than their share of global output...
"A large number of countries currently have a high debt-to-GDP ratio, as suggested by critical thresholds identified in the IMF's debt sustainability analysis. In 2017, more than one-third of advanced economies had debt above 85% of GDP, three times more countries than in 2000. One-fifth of emerging market and middle-income economies had debt above 70% of GDP in 2017, similar to levels in the early 2000s in the aftermath of the Asian financial crisis. One-fifth of low-income developing countries now have debt above 60% of GDP, compared with almost none in 2012."
"From a longer-term perspective, global indebtedness has been driven by private sector debt-which has almost tripled since 1950. For almost six decades, advanced economies spearheaded the global leverage cycle, with the debt of the nonfinancial private sector reaching a peak of 170% of GDP in 2009, with little deleveraging since. Emerging market economies, in contrast, are relative newcomers. Their nonfinancial private debt started to accelerate in 2005, overtaking advanced economies as the main force behind global trends by 2009. Private debt ratios doubled in a decade, reaching 120% of GDP by 2016."
"The ongoing recovery presents a golden opportunity to focus fiscal policy on rebuilding buffers and raising potential growth. Forecasts indicate that economic activity will continue to accelerate, which implies that fiscal stimulus to support demand is no longer a priority in most countries. Governments should avoid the temptation of spending the revenue windfalls during good times. Starting to rebuild buffers now will ensure that policymakers have sufficient fiscal ammunition to respond in case of a downturn and prevent fiscal vulnerabilities themselves from hurting the economy."
Wishful thinking with respect to "a golden opportunity." The global government finance Bubble has been fueled by almost a decade of near zero rates, massive central bank monetization and unprecedented amounts of government borrowing. My view holds that myriad global Bubbles have become only more vulnerable to any meaningful tightening of financial conditions. And there are pressing issues that increasingly put the loose financial landscape in jeopardy.
..
..Thinking back, I've always been intrigued by how the bond (and derivatives!) market was so caught by surprise in 1994. IO's and PO's and such and, of course, ghastly amount of speculative leverage.'
- Doug Noland,
Recalling 1994, April 21, 2018
Context (Banking Reform - Monetary Reform) - '..debt is our biggest security threat..'(Global - 2018) - '..manifestations of Monetary Disorder..''Human action originates change.' - 'Repress change, and you repress all that it means. Repressing it is sheer hubris..''..monetary knowledge .. of currency reform under difficult conditions you have to go to Carl Menger.''..I’ve lost all respect for monetary economists..'