New data on Global Debt

Discussion in 'Property Market Economics' started by JohnPropChat, 18th Feb, 2019.

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  1. JohnPropChat

    JohnPropChat Well-Known Member

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    New Data on Global Debt

    The long view

    In the past, we had detailed information about some bigger economies, such as the United States and Japan, but existing databases either covered a narrow measure of debt—for example, bank credit—for a broad sample of countries, or a comprehensive one for a few countries and years. By including both the government and private sides of borrowing for the entire world, the Global Debt Database offers an unprecedented picture of global debt in the post-World War II era. From all these data we have gathered a few new insights on debt:

    • Global debt has reached an all-time high of $184 trillion in nominal terms, the equivalent of 225 percent of GDP in 2017. On average, the world’s debt now exceeds $86,000 in per capita terms, which is more than 2½ times the average income per-capita.
    • The most indebted economies in the world are also the richer ones. You can explore this more in the interactive chart below. The top three borrowers in the world—the United States, China, and Japan—account for more than half of global debt, exceeding their share of global output.
    • The private sector’s debt has tripled since 1950. This makes it the driving force behind global debt. Another change since the global financial crisis has been the rise in private debt in emerging markets, led by China, overtaking advanced economies. At the other end of the spectrum, private debt has remained very low in low-income developing countries.
    • Global public debt, on the other hand, has experienced a reversal of sorts. After a steady decline up to the mid-1970s, public debt has gone up since, with advanced economies at the helm and, of late, followed by emerging and low-income developing countries.
     
  2. Silverson

    Silverson Well-Known Member

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    Who is the debt owed to?
     
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  3. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent Business Member

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    In the US, it is a mixture of: foreign governments (they want to hold USD for their reserves), domestic non-bank investors, and the Fed.

    In Japan it is their central bank.

    In China, it is domestic state owned banks.

    When we talk about central banks printing money, more accurately, they are printing debt.
     
  4. Silverson

    Silverson Well-Known Member

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    Who owns the central banks, fed etc?
    Will there come a time where this debt will need to be paid or a we going to continue down this road of increasing debt in your opinion?
     
  5. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent Business Member

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    No one knows who owns the Fed, but it is suspected that it is a cartel of the private investment banks. We know less about the Fed than we do the CIA.

    The best book on this is a classic (of its genre) from the 1990's called "The Creature from Jeckle Island". Fascinating read, but it is a conspiratorial rabbit warren, so read with skepticism.
     
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  6. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent Business Member

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    It is worth mentioning that central banking is completely antithetical to capitalism, and the American founders tried to warn us against ever having them. Thomas Jefferson (genius IMHO) in particular has some great quotes about central banks. Two of these are (very powerful):

    “If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”
    Thomas Jefferson

    “I sincerely believe that banking establishments are more dangerous than standing armies, and that the principle of spending money to be paid by posterity under the name of funding is but swindling futurity on a large scale.”
    Thomas Jefferson to John Taylor
     
  7. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent Business Member

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    Bringing it back to property: debt is very easy to create under our monetary system. Many bloggers talk about a property crash, but I am more inclined to think that the central banks would rather the currency devalue than the property markets. In which case, property would be a relative safe haven. We'll find out soon.
     
  8. Waterboy

    Waterboy Well-Known Member

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    It's just Money-Go-Round. Every borrower has a lender on the other side.

    It's not really the size of debt matters, it's the ability to move around money that makes the problem.
     
  9. JohnPropChat

    JohnPropChat Well-Known Member

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    That and fractional reserves means creating debt out of thin air.
     
  10. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent Business Member

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    Yep, $10 new freshly minted dollars for every $1 we deposit.
     
  11. Waterboy

    Waterboy Well-Known Member

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    Even our banks borrow money so they can lend us money. And banks also borrow from each other. one party's Liability is another party's Asset. Etc Etc. Welcome to the world of Money-Go-Round Ponzi Wealth Creation.

    That's why when "Credit Crunch" happens, the proverbial shet hits the fan.
     
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  12. radson

    radson Well-Known Member

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    Global Net Debt is always zero?
     
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  13. Waterboy

    Waterboy Well-Known Member

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    Yeah, it's like the Laws of Thermodynamics.

    Unless, of course, we owe lots of money to the Martian overlords!
     
  14. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent Business Member

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    The reason debt can be accumulated ad infinitum is because we owe it to the central banks. We are not seeing central banks as a counter party (with equal savings) but rather as an issuer of debt.

    The second reason is due to "fractional reserve banking", where you deposit $1, and the banks can lend $9.
     
  15. Perthguy

    Perthguy Well-Known Member

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    Someone in my class at uni claimed because the $9 isn't "real", he could buy a house and just not pay the loan. I wished him luck with his strategy.

    For anyone who thinks the $9 isn't "real", stop paying your mortgage. You can explain to the judge that the money the bank is pursuing isn't "real". Post back and let us know how you get on. ;)
     
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  16. Waterboy

    Waterboy Well-Known Member

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    It is indeed real money, albeit characterised in another form. If all depositors demanded their money back, the banks would not be able provide money for withdrawals, because of the $10 deposit, $9 was lent to borrowers, only $1 is in the vault!

    That's why governments would want to avoid a "bank run" - when depositors want to get all their money back - because banks would not be able to provide the money as they don't have a full 100% reserve i.e. only a "fractional reserve".

    During the GFC the government had to issue the Bank Guarantee - some kind of deposit insurance - to avoid this kind of situation, because it could be a chaotic situation indeed. And now the regulators have toughened up the capital reserve requirements and have been "stress-testing" the banks to see what could go wrong.

    It's not like the $9 magically appeared from nowhere - they are monies from the depositors (and shareholders and bondholders)!
     
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  17. Waterboy

    Waterboy Well-Known Member

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    ^So out of the first $10 deposit to Bank XYZ, $9 is loaned to a borrower who buys a house whilst $1 is in the vault as reserve. Say the seller of the house is also a customer to Bank XYZ, deposits $9 from the sale proceeds, voila there is now $19 worth of deposits in the accounting ledger of Bank XYZ out of the initial $10.

    Do this a million times, there is your mountain of debt backed by a $10 deposit.
     

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