Tuesday, October 18, 2016

The thing about $152 trillion in global debt....


The thing about $152 trillion in global debt is, it's also $152 trillion in global assets.

Tim Taylor - global debt hits all-time high. Quote:
Global debt is at an all-time high: specifically, "nonfinancial debt," which is the combined debt of governments, households, and nonfinancial firms in the 113 countries that make up 94% of world GDP. The IMF discusses the situation in its "Fiscal Monitor" for October 2016, which is subtitled "Debt: Use it Wisely."
But shouldn't global debt be at an all-time high if yields are so low? It obviously costs very little to service that debt, and there's a lot of money out there desperate to clip the paltry coupon on that debt.

I mean, the IMF says current debt is around 225% of world GDP; but at today's rates, that's probably only somewhere around 5-10% of world GDP that goes into debt servicing, depending on whether you're using the nominal or real rate, right?

And where else should investors' money go, if not into buying principal & coupon?

Savills estimates world real estate value at $217 trillion, so is global real estate underpriced relative to bonds? Is the world spending far too much of its GDP on renting land and buildings?

Global stock market capitalization is at around $70 trillion or so, supposedly; are global stock markets really underpriced so badly that they could accommodate a few tens of trillions leaving the global bond market?

There's only about $7 trillion in gold; is gold underpriced?

Or should investors dump bonds and just hold cash, the good ol' perpetual zero-coupon bond? Unfortunately, world broad money supply is only around $80 trillion.

Or, most likely: is the IMF simply pumping debt hysteria again?

As an aside:

Brad Setser - is China's problem too much debt, or rather is it too much savings?

Maybe the worldwide problem is too much savings?

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