Category Archives: Debt

Global Debt To Hit All Time High $255 Trillion, 330% Of World GDP, by Tyler Durden

$255 trillion is just the stated, nominal debt, and doesn’t include unfunded liabilities, contingent liabilities, or derivatives. From Tyler Durden at zerohedge.com:

There are three certainties in life: death, taxes and that global debt will keep rising in perpetuity.

Addressing the third, yesterday the Institute of International Finance reported that global debt has now hit $250 trillion and is expected to hit a record $255 trillion at the end of 2019, up $12 trillion from $243 trillion at the end of 2018, and nearly $32,500 for each of the 7.7 billion people on planet.

“With few signs of slowdown in the pace of debt accumulation, we estimate that global debt will surpass $255 trillion this year,” the IIF said in the report.

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The Holy-Cow Moment for Subprime Auto Loans; Serious Delinquencies Blow Out, by Wolf Richter

The auto industry is discovering the folly of lending to people with iffy prospects of paying the loan back. From Wolf Richter at wolfstreet.com:

But it’s even worse than it looks. And this time, there is no jobs crisis. This time, it’s the result of greed by subprime lenders. 

Serious auto-loan delinquencies – auto loans that are 90 days or more past due – in the third quarter of 2019, after an amazing trajectory, reached a historic high of $62 billion, according to data from the New York Fed today:

This $62 billion of seriously delinquent loan balances are what auto lenders, particularly those that specialize in subprime auto loans, such as Santander Consumer USA, Credit Acceptance Corporation, and many smaller specialized lenders are now trying to deal with. If they cannot cure the delinquency, they’re hiring specialized companies that repossess the vehicles to be sold at auction. The difference between the loan balance and the proceeds from the auction, plus the costs involved, are what a lender loses on the deal.

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Is The ‘Mother of all Bubbles’ About to Pop? by Ron Paul

Is the repo market the canary in the coal mine for global financial markets? From Ron Paul at ronpaulinstitute.org:

When the New York Federal Reserve began pumping billions of dollars a day into the repurchasing (repo) markets (the market banks use to make short-term loans to each other) in September, they said this would only be necessary for a few weeks. Yet, last Wednesday, almost two months after the Fed’s initial intervention, the New York Federal Reserve pumped 62.5 billion dollars into the repo market.

The New York Fed continues these emergency interventions to ensure “cash shortages” among banks don’t ever again cause interest rates for overnight loans to rise to over 10 percent, well above the Fed’s target rate.

The Federal Reserve’s bailout operations have increased its balance sheet by over 200 billion dollars since September. Investment advisor Michael Pento describes the Fed’s recent actions as Quantitative Easing (QE) “on steroids.”

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The Globalists Have Declared War on Your Savings, by Andrew Moran

Governments are bankrupt, so they’re going to take money any place they can find it. Raiding people’s piggy banks will yield an ample haul, but that only works once. From Andrew Moran at libertynation.com:

When any one of the plethora of bubbles burst – pick your poison – and the next financial crisis impacts Wall Street and Main Street, how will the central banks and federal governments react? They have fired all their unconventional rounds of bullets, from subzero interest rates to vast money-printing. One other proposal could conceivably be giving your deposits a haircut, much like what occurred in Cyprus following the recession. This dyspeptic vision is not hyperbole nor is it paranoia – the tariffs have raised the price of tinfoil! It is unfolding right now as our globalist overlords are executing, or at least entertaining, fiscal and monetary measures to confiscate your wealth – directly or indirectly.

Plugging Holes In Swiss Cheese

 

 

 

 

Switzerland is one of the few European nations to record a federal budget surplus. The budget for the fiscal year 2020 will record a $615 million surplus, despite imposing pension and tax reforms that slashed revenues and raised spending. The Swiss government is handcuffed by a so-called debt brake, a balanced-budget amendment that mandates the budget to be in balance throughout the business cycle. This policy has decreased the debt-to-gross domestic product ratio to nearly 25%.

Although national debt levels are still at multi-decade highs, the fact that the government is taking red ink seriously should be music to the ears of fiscal conservatives. But to others, it is headache-inducing.

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Bankers Going for Broke Because They Know it’s Broke – G. Edward Griffin, by Greg Hunter

The banks are getting while the getting is good, but they know the getting won’t be very good for much longer. From Greg Hunter at usawatchdog.com:

Edward Griffin, author of the wildly popular book about the Federal Reserve “The Creature from Jekyll Island,” is holding a conference this weekend called “Red Pill Expo.” It is all about waking people up from the illusions they are being told. Griffin explains, “The illusions are in health, in politics and in education. The illusions are in the media, in money and in banking, which is my specialty. So, people are coming, some of whom are informed, but most respond to the slogan we are using for the “Red Pill Expo,” and the slogan is ‘Because you know something is wrong.’ That sort of spells it out for most people, not just in America, but for people all over the world. People everywhere are being fed propaganda, lies and false stimuli of all kinds, but deep in their hearts, deep in their instincts, they know something is wrong.”

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Negative Yielding Bonds Turn into Punishment Bonds, by Wolf Richter

There’s nothing more predictable in financial markets than the losses that have begun to be inflicted and will continue to be inflicted on those who have bought bonds bearing negative interest rates. From Wolf Richter at wolfstreet.com:

After peak negative-yield-absurdity in August, bond prices fell – the “bond bloodbath” – and the mountain of bonds with negative yields has plunged by $5 Trillion, or by 30%, despite rate cuts.

The 10-year US Treasury yield rose on Friday to 1.94%. That’s still very low, and below inflation as measured by core CPI (2.4%), but it’s up nearly 50 basis points from the lows at the end of August. During this time, the Fed has cut its interest rate target twice, by a total of 50 basis points, and short-term Treasury yields have fallen by about that much. With the one-month yield now down to 1.56% and the 10-year yield up at 1.94%, the yield curve has un-inverted and steepened.

US debt isn’t the only place where long-term yields have been rising despite major central banks’ action or at least verbiage on the rate-cut and QE side. The rise in long-term yields despite ultra-low or negative shorter-term yields has reverberated around much of the world.

When yields rise, bond prices fall, and what has been going on has been described as “bond bloodbath.” That term may be pushing it, considering what a real bond bloodbath could look like.

But for holders of long-term bonds that they bought with negative yields, it is a very unpleasant experience when prices of those negative-yielding bonds also drop. And that’s what they’re facing now.

n the Eurozone, where the ECB in September cut its deposit rate deeper into the negative, long-term yields have risen across the board.

The German 10-year yield rose to -0.26% on Friday, up nearly 50 basis points from the low at the end of August. The 20-year yield became positive (0.03%), and it has pushed the 30-year yield further into the positive.

Germany’s 30-year bonds are infamous for the government’s efforts to sell them at a negative yield of -0.11% on August 21. The bonds were offered with a 0% coupon – so no interest payments for 30 years – and at a premium, in order to achieve the negative yield of -0.11%. This effort that mostly failed: €2 billion of these insane bonds were offered, but there weren’t enough brain-dead investors, and those that the government could round up bought only €824 million. That day marked peak-negative-yield absurdity.

The French 10-year yield transitioned into the positive on Thursday for the first time since July and closed on Friday in the positive (+0.023%), up almost 50 basis points from -0.45% at the end of August.

The Spanish 10-year yield which had come close to zero at the end of August rose to 0.39% by Friday.

The Belgian 10-year yield, which had dropped as low as -0.38% at the end of August, turned positive on Thursday for the first time since July and closed on Friday with a yield of 0.02%, up 40 basis points from August.

The Italian 10-year yield, which never made it into the negative despite Draghi’s best efforts, rose 30 basis points from 0.82% in early September to 1.18% on Friday.

In Switzerland – the first country to actually sell new 10-year bonds with a negative yield in April 2015 – the 10-year yield had bottomed out at -1.10% on August 16, and has since soared 70 basis points to -0.40%. Those are true punishment bonds for folks who bought them in mid-August. For those buyers, the annual yield will be -1.1% until they get rid of those bonds, but now the bonds are also losing value, and if those August buyers want to sell the bonds, they will also have a capital loss.

In Japan – the second largest government bond market in the world, if you can call it a “market” though it’s totally controlled and dominated by the Bank of Japan – the 10-year yield has risen from -0.29% at the end of August to -0.06% now.

And this has played out across much of the negative-yield world, where short-term yields remain negative, but long-term yields have risen as bond prices have fallen.

The mountainous amount of negative yielding debt had peaked at a mind-bending $17.03 trillion on August 29, but has since then plunged by $5 trillion, or by 30%, to $11.94 trillion on Friday, still a huge gigantic amount of sheer absurdity, but the lowest amount since June, according to the BNYDMVU Index, posted by Bloomberg’s Lisa Abramowicz (click to enlarge):

This comes at a time when investors are having to absorb a flood of government and corporate debt coming on the market in the US, Europe, and elsewhere, looking for buyers.

The ECB, the Bank of Japan, and the Swiss National Bank have already admitted that negative interest rates weaken banks and have recently offered deals to banks to “mitigate” those destructive effects. Bank stocks in Europe and Japan are trading in the realm where they’d traded decades ago.

But negative interest rates or very low interest rates have an even more destructive impact on the real economy: They not only create asset bubbles, and all the risks that come with them, but they also distort or eliminate the most important factor in economic decision making – the pricing of risk. Here is the transcript from my podcast, How Negative Interest Rates Screw up the Economy

Global Debt Is Up To $188,000,000,000,000 – This Is Officially The Biggest Debt Bubble The World Has Ever Seen, by Michael Snyder

We like to keep track of the mind-boggling debt numbers. From Michael Snyder at themostimportantnews.com:

The world is now 188 trillion dollars in debt, and that number continues to grow rapidly each year. It is a form of enslavement that is deeply insidious, because most of those living on the planet do not even understand how the system works, and even if they did most of them would have absolutely no hope of ever getting free from it. The borrower is the servant of the lender, and the global financial system is designed to funnel as much wealth to the top 0.1% as possible. Of course throughout human history there has always been slavery, and the primary motivation for having slaves is to extract an economic benefit from those that are enslaved. And even though most of us don’t like to think of ourselves as “slaves” today, the truth is that the global elite are extracting more wealth from all of us than ever before. So much of our labor is going to make them wealthy, and yet most people don’t even realize what is happening.

Let’s start with a very simple example to help illustrate this.

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