The BIS Chart That Abe And Kuroda Would Rather You Didn't See

Tyler Durden's picture

Earlier we noted the rather peculiarly truthful (lack of optimistically-biased bullshit) annual report from the BIS as reading ZeroHedge-sermon-like. There is a smorgasbord of data, charts, and quotes strewn throughout the 204-page melodrama but one caught our eye. Reflecting on the fact that governments in several major economies currently benefit from historically low funding costs, and yet at the same time, rising debt levels have increased their exposure to higher interest rates, the BIS projects the dismal reality that any rise in interest rates without an equal increase in the output growth rate will further undermine fiscal sustainability.

Although predicting when and how a correction in long-term rates will unfold is difficult, it is possible to examine the potential impact on the sustainability of public finances and how any normalization of rates (or Abe's success in creating 2% 'inflation' in Japan) leads the nation's debt-ratio to explode (to over 600% debt-to-GDP).

What is more concerning is that even with no negative impact from demographics (age-related adjustments) and even assuming a central bank that can keep interest rates at their ultra-low levels for another 30 years, Japan's debt-to-GDP ratio will reach almost 400% (that's a best case scenario!!)



Unsurprisingly, the higher the interest rate, the faster debt will increase; and while the BIS and the central planners of the world clearly 'believe' they can manipulate JGB yields should this happen, we suspect there is a (non-specific R&R vs Krugman based) limit that once crossed creates the qualitative perception shift that Kyle Bass has so unequivocally explained is coming.

As we noted earlier from the BIS - "some policies have clearly hit their limit."

Chart: BIS

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NoDebt's picture

I'll go with Purple for a qudrillion Yen, please, Alex.

OK, NoDebt, the answer is "parabolic."

What is "Japan's inevitable debt death spiral?"


GVB's picture

you see the exponential curve in that chart? that are exponentials at work and this is hyperinflarion smiling at you.

fonzannoon's picture

These charts will come into play once the banks are done buying every real asset with fake money.

disabledvet's picture

the banks are the one's with the problems since they're holding the bag of all those JGB's. "they've solved that problem" however by locating the bulk of Japan Inc. in the USA "from many decades ago." this has turned out to be a VERY smart move...ironically enough one US business simply had given up on simultaneously. obviously the BIS is talking about the UNITED STATES and not Japan as i think Japan is wholly ready to hold its own vis a vis other East Asian competitors. call it the "fear of China" trade but that weak yen is going to be devastating to export led economies both over there but especially in Europe as well. "the Age of Competitive Devaluations" is now underway...and i think that makes for a POWERFUL argument that gold has in fact peaked IN PRICE...(but obviously not in value. still can use it to "settle" trade accounts in the sense that all transactions are to be done "weighted" in gold with both sides having an equal amount before any deal is inked. this solves the 2008 "trust deficit" that Goldman Sachs continues to so eloquently exemplify with of course "the ratings Agencies" signing off as "all good.") if you start seeing savings accounts that yield 4% in the USA "then we have a winner." obviously that would be the US based banks...overwhelmingly regional banks of course but who knows...maybe even JP Morgan will find a way to make money here as well as "they're the most levered to growth that still has so far failed to materialize." I imagine BofA still has a few issues as well.

This just in's picture



My new favorite term.  Thanks!

sansnobel's picture

If the Government of any country can issue new debt with no collateral to back it;  to pay off old debt in a virtuous and never ending circle jerk, then this game will never end until the sheep wake up and realize that they have been hoodwinked on a monumental scale and refuse to use the Government's "money".  My bet now is that this will not happen because "they" will threaten to pull the welfare plug and the Sheeple will comply to make sure their "gam gam" doesnt lose her "benefits".  A mass sweeping movement towards Nihilism will be the only thing that ever brings these shenanagins to a grinding halt.  They can keep inflation excactly where they want it if they control the banks and their reserves.  This was the end game all along........NWO wins....Brave New world indeed....Only suicide will bring it down.  The world has been dumbed down against its own interest.

Monedas's picture

It is impossible for American, female nigroes to loose their benefits .... kindly give us a few anecdotes at least .... that includes getting fired from a government job .... the Public Servant Oligarchs .... have vastly different risks sets .... than the tax fodder class !

sansnobel's picture

Are you really that fucking stupid?

slotmouth's picture

It appears that you have found a yokel more slack jawed than yourself.

sansnobel's picture

Can't really give any commentary on getting fired from a government job cause I have never really seen one.  If you are speaking of Welfare recipients like yourself losing their GUBMENT CHEESE well we both know that will never happen because the Congress critters rely on their voting fraud schemes along with the Leftist Supreme Court to give people who never pay a God Damn Dime in Tax a Fucking Vote!!!!

lasvegaspersona's picture

My crystal ball sez that the curves will not get a chance to grow ...there will be a gold backwardation related POP!! Soon!!

NidStyles's picture

I think the rate of increase was understated in that graph.

NoDebt's picture

I think so, too.  Purple was just the highest line they plotted.  Since they're talking about government debt, I always focus on the highest line.  It's always the closest to correct.

stocktivity's picture

"The BIS projects the dismal reality that any rise in interest rates without an equal increase in the output growth rate will further undermine fiscal sustainability"

Wow!!   Nobody here realized that bit of info. It's All Bullshit!!!

CaptainSpaulding's picture

What is a Biz and who is Abe? Abe Lincoln?

theliberalliberal's picture

who would loan a government money @ 2% if they are at 600% debt to GDP?


will be a lot more parabolic

ziggy59's picture

Each country in same boat...USS PONZI

123dobryden's picture

okey, 200% two years country production lost, yet japanese after WWII which destroyed several years of production come back to become leading industrial powerhouse again

theliberalliberal's picture

isnt that the point here?


can we PLEASE hurry up and have this shit storm so we can get back to proper growth.   We know it will be a year of hell,  but it will be brief if you dont f@#k with it and let it happen.

NoDebt's picture

Patience, grasshopper.  Patience.  You are young.  You will live to see it happen.  And when it does, it won't be exactly as you or I or anyone expects.

DeadFred's picture

That it will happen is already set in stone. How it unfolds and how bad things will be is still up in the air. Hope and pray for the better versions. No nukes please.

RockyRacoon's picture we can get back to proper growth.

You only need "growth" because debt has to be serviced.  If debt and interest rates are equalized by actual capitalism (not the abortion of fascism we now have) then normal growth is organic and regular business cycles are tolerated, weak entities are properly extinguished, and populations don't have to grow like locust to service the socialized system.  Get a grip on the "growth" myth.

lasvegaspersona's picture


that can't happen except by some natural force...the wrong pockets would be emptied...what is coming must be due to the absolute putrification of the system at its core and will be resisted possibly to the death (yours? mine? some random soldiers? I'm not sure but death will not stop those in power from resisting what is coming.) Fortun ately the destruction of the system is going to come and it will be hard to bear but eventually we shall see a better way of running a world wide monetary system.

matrix2012's picture


growing into obliteration


English transcript of Arithmetic, Population and Energy - a talk by Al Bartlett

It's a great pleasure to be here, and to have a chance just to share with you some very simple ideas about the problems we're facing. Some of these problems are local, some are national, some are global.

They're all tied together. They're tied together by arithmetic, and the arithmetic isn't very difficult. What I hope to do is, I hope to be able to convince you that the greatest shortcoming of the human race is our inability to understand the exponential function.

Well, you say, what's the exponential function?

This is a mathematical function that you'd write down if you're going to describe the size of anything that was growing steadily. If you had something growing 5% per year, you'd write the exponential function to show how large that growing quantity was, year after year. And so we're talking about a situation where the time that's required for the growing quantity to increase by a fixed fraction is a constant: 5% per year, the 5% is a fixed fraction, the “per year” is a fixed length of time. So that's what we want to talk about: its just ordinary steady growth.

Well, if it takes a fixed length of time to grow 5%, it follows it takes a longer fixed length of time to grow 100%. That longer time's called the doubling time and we need to know how you calculate the doubling time. It's easy.

You just take the number 70, divide it by the percent growth per unit time and that gives you the doubling time. So our example of 5% per year, you divide the 5 into 70, you find that growing quantity will double in size every 14 years.

Well, you might ask, where did the 70 come from? The answer is that it's approximately 100 multiplied by the natural logarithm of two. If you wanted the time to triple, you'd use the natural logarithm of three. So it's all very logical. But you don't have to remember where it came from, just remember 70.

I wish we could get every person to make this mental calculation every time we see a percent growth rate of anything in a news story. For example, if you saw a story that said things had been growing 7% per year for several recent years, you wouldn't bat an eyelash. But when you see a headline that says crime has doubled in a decade, you say “My heavens, what's happening?”


a talk by Al Bartlett on the impossibility of exponential growth on a finite planet


The full playlist of the related lectures

The presentation is titled "Arithmetic, Population, and Energy," and I introduce it to my students as "The most boring video you'll ever see, and the most important." But then again, after viewing it most said that if you followed along with what Bartlett is saying, it's quite easy to pay attention, because the content is so damn compelling.

Over 4 million views for an old codger giving a lecture about arithmetic?? What's going on? You'll just have to watch to see what's so damn amazing about what he (Prof. Albert Bartlett) has to say.

When I saw this lecture at a conference in 1995, I came out blasted, thinking "This needs to be required listening for every person on the planet. Nothing else will matter if we don't understand this." The presenter is Albert Bartlett, a retired Physics prof. at U of Colorado-Boulder.


Stoploss's picture

I'll take interest rates for 10,000.

Q: When interest rates rise..?

A: I can't pay my house note any more, again...

What did i win Alex??

The Thunder Child's picture

Fuck You Rothschilds!

Temporalist's picture

Motto!  (that mean MOAR)

Yen Cross's picture

       On that note, is anyone watching that batshit crazy Nik wallenda getting ready to walk across the "Grand Canyon" on a tight rope, with no safety harness or nets? It's live on the 'Discovery Channel' right now.

NoDebt's picture

No, I'm watching Reality TV right now.  I like things that are only "real" in quotations.  Not actual REAL things.

Yen Cross's picture

      I'm "really" happy for you. Take a look at this reality show.

NoDebt's picture

Just watched the last few minutes of his (successful) crossing.  Very impressive.  I still have vetigo.

But the real question is: "Could he do it with the entire Japanese government debt on his back?"  I suspect not.

AGuy's picture

"On that note, is anyone watching that batshit crazy Nik wallenda getting ready to walk across the "Grand Canyon""

No, Instead I am watching that batshit crazy Abe destroy what remains of the Japanese economy. At the very worst, Wallenda will die and life will go on for everyone else. In the very best  case for Abe-nomics, everyone is going fall.

Bunga Bunga's picture

what if 3, 4, 5, 6 or 7 ppt? 1,000% debt-t-gdp seems sustainable, since 90% doesn't matter anymore.

Kirk2NCC1701's picture

Look, all these global bankster clubs (BIS, IMF, WB, Fed, ECB, BOE, BOJ...) and its "G7+1" or maybe even G20 will never allow their game and their assets to get wiped out.

We will see War before they get turfed.  Prepare for Feudalism II.


BandGap's picture

Agreed, everyone wants their slice, and there is only so much to go around.

When do we decide not to buy crap anymore?

22winmag's picture

War is an anachronism that belongs is a museum next to fiat currency. Playing the war card won't work this time... too many people have smartened up... too many patriots inside and outside of the U.S. military and U.S. government.

Hulk's picture

and we thought our housing was underwater !!!

kchrisc's picture

Of course the funny thing about this chart is that Japan will be lucky to make it out of 2013 functioning. LOL

Promethus's picture

At this point what's the difference. Abe should go all in. Full Retard.

starman's picture

"turning Japanise I think Im turning Japanise"( Krugman in shower)

buzzsaw99's picture

which is why we/they/whomever won't have higher interest rates. duh.

newengland's picture

The BIS are the smartest of the money manipulation, and I trust them to know their job.  However, they are bust, broken, deceased, pining for the fijords, and now seek to excuse their failed theories...while running off with the money for their vatican, monarchies and hofjuden which wages endless war on the majority, for their old feudalist/new world order to profit, regardless of its own failings, incompetence, hubris.

Look out below.

And understand that they chose O'bomba and the joker Biden after the old team Bush lost its public appeal.

@Watcher's picture

So I guess it's not Fukushima ?

mc_LDN's picture

When the going gets too tough start a war... Bullish.

Tic tock's picture

It's a really fundamental problem or, truth; the growth-industries are all Services, what don't have naything like the CapEx - and all suffer from Rights-Management. Computer games, for instance, are mindnumbingly dull when the IP has to be accounted for. Logistics and Plastics could be the main uses of Oil in ten yrs, meaning it's no longer the lifeblood, which is where Cybrecommand is such a 'Stasi'-concept (h/t), as that has the power to change or block communications and information betwen ordinary people. ..But if it's a digital economy, one, where are the volumes of cash; where are the skills, efficiency is through-the-roof - so where are the job-opportunities, how, who and why are the IP welfare-queens going to be allowed to recline in their gilded cages - how are you going to protect a market? ...we could see 30 -40% of the population in work, the rest, unnecessary. or, unemployed, rather. Now if that's where the economy wants to establish an equilibrium - and that's what trends and current capacity points to - the financial, social, and physical architecture, has to be designed to make that 'normal'.  ...right down at the bottom of it, it's about how income gets distributed - at the moment it all goes to the banks and they give it to their friends..the idea of giving money to people who are not 'the bank and their friends' would undermine their authority.

Cycle's picture

The Minsky moment arrives in Japan.