"It's An Alice In Wonderland World" - GRI Warns "Debt Is Being Piled Upon Debt Being Piled Upon Debt"

Tyler Durden's picture

The combination of low interest rates and "an explosion of debt" has become the biggest risk to the world’s economies, according to the head of Canada’s Global Risk Institute.

"These low interest rates could have the potential to be the next serious issue faced by countries and it’s because debt is exploding everywhere," Richard Nesbitt, 60, chief executive officer of the group that researches risks to the financial industry, said Monday in an interview in Bloomberg’s Toronto bureau.  

“There’s debt being piled upon debt being piled upon debt."

Since the middle of 2015, central bank balance sheet expansion has once again led to a collapse in sovereign bond yields, further encouraging global corporate debt to surge...

 

As the majors plunge into negative rates...

 

Global debt has climbed about 37 percent since the 2008 financial crisis, Nesbitt said, as central banks around the world have pushed interest rates down to stoke growth and even below zero in the case of Japan and some of Europe’s central banks.

Enticed by record-low interest rates, companies increased total debt by $2.81 trillion over the past five years to a record $6.64 trillion. In 2015 alone, liabilities jumped by $850 billion, 50 times the increase in cash by S&P’s reckoning.

 

And as SocGen showed last year, all the newly created debt in the 21th century has gone for just one thing: to fund stock buybacks.

 

Which, as Nesbit exclaims (via Bloomberg)...

“That is an Alice in Wonderland world, and if you go into negative interest rates, you are going through the looking glass and no one knows what will really happen," Nesbitt said.

 

The fact that Europeans and Japanese policymakers have pursued negative interest rates “should be a signal to people that things are very wrong," said Nesbitt, who was formerly head of capital markets business at Canadian Imperial Bank of Commerce. "Europeans do not seem to have a way out in my view, so it’s quite a broken situation."

 

Raising rates brings its own problems including a cascading effect of people being unable to meet bloated debt payments. The only way out, which is the most likely outcome, is leadership from the U.S., Nesbitt said. “We start to see the Federal Reserve in the United States start to raise interest rates and other economies such as Canada and Australia that can do it will follow."

 

"I think the ‘Goldilocks-just-right’ scenario is one where central banks can begin to raise interest rates on a slow systematic basis over a period of many years and the economy is able to absorb that."

Good luck with that... as economic growth forecasts are collapsing...

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N0TaREALmerican's picture
N0TaREALmerican (not verified) Jun 22, 2016 2:47 PM

 

But, don't forget,  debt that can be rolled over is really an asset.   

Winston Churchill's picture

Bit like your pension.So close but so far.

NoDebt's picture

"Richard Nesbitt, 60, chief executive officer of the group that researches risks to the financial industry, said Monday in an interview in Bloomberg’s Toronto bureau."

Another fucking "financial expert" windbag saying shit you could have learned on ZH 5 years ago FOR FREE.  Guys, they PAY PEOPLE A LOT OF MONEY for this kind of "insightful", "timely" commentary.  

 

MalteseFalcon's picture

"all the newly created debt in the 21th century has gone for just one thing: to fund stock buybacks."

If interest rates go up, plenty of companies are going down.

Cheap assets coming.

Oquities's picture

thufferin' thucotash, i thought it was 21st, not 21th.   the 1th time i knowed that were on my 11st birfday.

Bryan's picture

No worries.  We have paper and ink.

guaposoyyo's picture

What we need is a good war, which inferior nation shall we destroy? I am thinking some dirt farmers or rice patty villages.

We need to protect the 'Merican way of life at all costs. 

N0TaREALmerican's picture
N0TaREALmerican (not verified) guaposoyyo Jun 22, 2016 3:13 PM

 

I think the sand people are already lined up.   It's because they hate our freedums.  

HRH of Aquitaine's picture
HRH of Aquitaine (not verified) Jun 22, 2016 2:50 PM

I think this used to be called irrational exuberance.

Ghost of Porky's picture

Debt doesn't matter. A guy told me.

NumNutt's picture

but but but , I thought this was "good debt"....is there such a thing?

autofixer's picture

Don't worry, alligators are not dangerous.

Yen Cross's picture

 

Where do these people get their statistics???

  I can't stop laughing>Global debt has climbed about 37 percent since the 2008 financial crisis<

   Has this person looked at the PBoC and BoJ balance sheetsDon't even get me started on the unfunded liabilities farce.

   GFC, the PBoC balance sheet is almost $31T usd.

ISawThatToo's picture
ISawThatToo (not verified) Jun 22, 2016 3:03 PM

Banabait #266

The flipside of fiat-debt: The Khazarian grifters steal our deposits, counterfeit into existence fiat based upon that theft, and then fence the whole stinking pile of grift to some unsuspecting Goy "borrower." The fiat and fiat-debt are like theft-certificates that certify the Khazarians' plundering of us. That the Khazarians then demand "repayment" of what they have effectively stolen from us is perverse.

But then, while the Khazarians have you peering suspiciously at Hammad, and resenting Juan, they are every second plundering your wallet and pillaging your future. And while the Khazarians have you debating the who and where of bathrooms, and whether your neighbor might have been once a man, they are setting it up again to use your children as cannon fodder.

Better soon get your priorities straight.

tarabel's picture

 

My priorities are fine, so far as I know.

I don't leave money in banks, regardless of who owns them.

I don't worry about Juan or Hamid. Or Menachem, for that matter. I mind my own business and let others mind theirs.

I don't believe that there is any such thing as an "unsuspecting" borrower. Caveat Emptor applies to the Nordic Master Race as well as all the little brown and yellow brothers.

I have three bathrooms in my house strictly for my own use. Plus one more in the RV. And three more in the other ranch houses. Friends, family, and distressed travellers are welcome to use any of them and I have no plans to dedicate their usage to specific subgroupings of people.

Yes, my neighbor was once a man. Now he's 85 and still doing the best he can but unfortunately needs more help than he likes to ask for. I pitch in and turn down his offers of payment. One day it will be my turn to be a former man reliant upon the strengths of others.

The wheel of life continues to roll. A mighty crisis is coming. Those who are angry will be blinded by their rage and it will lead to their destruction. Satan doesn't care who you hate, only that you do hate. It's the way in which the door to the heart is opened and no doubt good intentions get cunningly bent into doing the Devil's work. 

Oh, and I do not have a mouse in my pocket. Too many cats around here. The poor thing wouldn't last a minute.

Doppelganger71's picture

If you're a drinkin' man, I'd like to buy you the beer of your choice, should we ever meet. Truer words were never spoken........

tarabel's picture

 

 

I'd be honored to drink a beer with you, Mr. D, but must insist that it be of your choice since you are the one buying. Prosit. Salud. And to better times for everyone.

SheepDog-One's picture

When the Banksters overlords decide its most beneficial to them, they'll pull the rug out again.

Don Sunset's picture

Has anyone asked Al Gore how to fix this problem?

Gead's picture

this whole thing reminds me of a buddy who once was a successful business owner locally. He ran into over-extending himself as regards credit for stock (inventory; not, 'Wall Street'). Things slowed down, actual product didnt' get sold in the time period he'd thought it would. So.......... he obtained more credit - cards, business credit cards and lines of credit at higher rates of interest. As those came due, he had to do the same again going to other credit issuance companies. If I remember correctly, he did this scheme apx. 4 times. Today, his business is gone. Inventory sold off to cover less than half what was owed. And my friend? He suffered a stroke and now lives in a senior nursing home in a wheel-chair, left-side totally immobilized and barely able to speak. When he does talk, he will say, "just one more time and I'd've gotten out of debt!!!"  Some lessons never are learned.

Bill of Rights's picture

What's in your wallet...

buzzsaw99's picture

Those numbers don't make any sense as presented. Non financial corporate debt for the usa alone is around $16T. Add in the banks and the number is omg big.

Econogeek's picture

'The only way out, which is the most likely outcome, is leadership from the U.S.... "I think the ‘Goldilocks-just-right’ scenario is one where central banks can begin to raise interest rates on a slow systematic basis over a period of many years and the economy is able to absorb that."'

In your dreams, Mr. Nesbitt.

To Infinity And Beyond's picture

"These low interest rates could have the potential to be the next serious issue faced by countries" - says Captain Obvious

blindman's picture

ok, what is money again?
.
http://www.maxkeiser.com/2016/06/kr930-keiser-report-economic-anxiety-in...
[KR930] Keiser Report: Economic Anxiety in Divided America
Posted on June 21, 2016 by Stacy Herbert —

blindman's picture

who needs money when you have a monopoly on
the execution and expertise of fraud,
doesn't that just sum it up?