IMF Says Japan And Spain Are Done, "Debt Ratio Will Never Stabilize"

Tyler Durden's picture

The IMF believes that advanced economy deficits will decline by about 0.75 percentage points of GDP this year which 'strikes a compromise between restoring fiscal sustainability and supporting growth". However, continued focus on nominal deficit targets runs the risk of compelling excessive fiscal tightening if growth weakens. In addition, there is a risk in the United States of political gridlock that puts fiscal policy on autopilot and results in a sharp and sudden decline in deficits—the “fiscal cliff.” What is more troubling is the significant upward revision to all of the peripheral European nations (with Greece now at 171% Debt/GDP in 2013 versus 160.9% forecast only 3 months ago). While the average debt-to-GDP ratio among advanced economies is projected to continue to rise over the next two years, surpassing 110 percent of GDP on average in 2013, debt ratios will by then have peaked in several advanced economies - though rather explosively they do not see debt ratios for Spain and Japan stabilizing.

Debt/GDP ratios seen rising across Europe and most specifically Greece is losing it again and Spain bleeding fast...

Spain and Japan are seen to have debt ratios that are not stabilizing...

IMF2

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zero19451945's picture

You can't deficit spend forever. It simply doesn't work.

bilbao's picture

Sure you can. That's how fiat money is created in a debt-based monetary system, such as ours.

 

Wake up! We live in a DEBT-BASED MONETARY SYSTEM. Debt-GDP ratios are meaningless for countries that issue their own currency as debt...

See: Robert J. Shiller: Debt and Delusion

tmosley's picture

That has a 60-year hard time limit, unfortunately.  We are on year 41.  The mean is more like 20 years.

LowProfile's picture

 

Sure you can. That's how fiat money is created in a debt-based monetary system, such as ours.

Wake up! We live in a DEBT-BASED MONETARY SYSTEM. Debt-GDP ratios are meaningless for countries that issue their own currency as debt...

Unless the issuing central bank monetizes the debt.

consequences of debt monetization - Startpage Web Search

...Exactly who needs to wake up, again?

vast-dom's picture

don't tell Obamneyzi, Bernankzi and Krugzi.

geewhiz190's picture

off topic but,  PBOC is in the us dollar market again today bidding for dollars, they're willing to pay up for the USD by 5 bps. on six months

old naughty's picture

Good Boy !

They are jockeying for membership.

G7 minus two (oops, too soon for Italy) ; to be replaced by BRIC minus two (China and Russia).

Its inevitable...If we last that long.

Anne Ominous's picture

Don't stop there. Japan, Spain , Britain, Ireland, Greece, Italy, France and soon Germany are all fucking broke.

 

Oh Yeah - and the US. Left that off the speech.

 

Gold not set to go yet - still have SDRs before the big paradigm swap.

 

DIMF.

Canadian Dirtlump's picture

Looks like Green economies, and economies based on vending machines with soiled underwear in them share something afterall.

 

They are both the shits for long term success.

ptoemmes's picture

What, no second derivative Hopium?

TrainWreck1's picture

"In addition, there is a risk in the United States of political gridlock that puts fiscal policy on autopilot and results in a sharp and sudden decline in deficits—the “fiscal cliff.” "

I'll take political gridlock in the US any day of the week. Sure it will impair fiscal policy, but anything that results in congress doing less can't be all bad. In fact, given their track record over the past few decades, anything that slows them down is probably best.

Too bad the ratings agencies don't grade congress. We might see the first F-F-F-

btw, is the IMF rated?

 

caimen garou's picture

Japan has been "over done" like a slice of burt toast

Vincent Vega's picture

In short...we are so fucked.

John Law Lives's picture

"While the average debt-to-GDP ratio among advanced economies is projected to continue to rise over the next two years, surpassing 110 percent of GDP on average in 2013, debt ratios will by then have peaked in several advanced economies - though rather explosively they do not see debt ratios for Spain and Japan stabilizing."

It would be laughable if anyone thinks the US debt ratio is going to peak in the next few years...

Mitzibitzi's picture

It could. But you'd need those FEMA camps if the government pulled the plug on the entire welfare system, which is about what it would take to manage it.

Burr's 2nd Shot's picture

Dead is a form of stability.

legal eagle's picture

That was very funny, thank you for the chuckle

Zero Debt's picture

You've obviously never met a zombie. If you do, .308 Winchester to the head does the trick

Ghordius's picture

hogwash. this is just propaganda from the weapons industry - ever bent to make you fearful, it sells.

 

if you meet a zombie, a baseball bat or a big blade is the only solution. you either smash it's head until the brain is pulp or you cut off the head.

if you meet a vampire or a werewolf, the same. don't try with silver, this is just propaganda from the bugs

 

if you meet a zombie bank, though, you need to cut the government support. it's a bit trickier

if you meet a vampire bank... shit! they are coming for me! quick, you have to.... aarrrrggghhhh!!!!

gjp's picture

The main reason the forecast changes are so dramatic for the PIIGS is because higher interest rates are blowing a hole in their budget.  Primary defiicits are even worse in the US, but interest rates are near all-time lows.  Sure is nice to have a sugar daddy with a printing press.

And on this basis the anglos lecture the rest of the world.  What a sick farce.

Mitzibitzi's picture

"Sure is nice to have a sugar daddy with a printing press."

Not when you have bills to pay and kids to feed! Every time the BOE presses Ctrl-P the cost of food goes up in direct proportion. With the exception of bread, milk and eggs (maybe a few other things) which seem to being artificially held down compared to everything else.

I imagine the same is true in the US, as well?

Jlmadyson's picture

From Richard Duncan today from CNBCs piece How close are we to a new great depression;

When we broke the link between money and gold this removed all constraints on credit creation. This explosion of credit created the world we live in, but it now seems that credit cannot expand any further because the private sector is incapable of repaying the debt it already has, and if credit begins to contract, there's a very real danger that we will collapse into a Great depression.

If this credit bubble pops, the depression could be so severe that I don't think our civilization could survive it.

End.

Exactly the govts can print all they want but in the end it matters little.

Bicycle Repairman's picture

Did the Soviet Union worry about credit creation?

Everybodys All American's picture

... no they just buried everyone alive. I'm sorry but your probably too young to have known Stalin.

Snakeeyes's picture

No kidding. It was NEVER in doubt.

onebir's picture

There's usually a way to tweak it so debt/GDP stabilises a few years out...

onebir's picture

IMF forecasts no stabilisation in two major economies' debt/GDP ratios*. ECB recommended senior bondholders take losses, and it got leaked.

This is a very strange day...

(*over the forecast horizon)

firstdivision's picture

So much for inflating your way out of debt.

If Japan is done, then the US will be done, albeit in less than 20 years since this depression was started by more than just a housing bubble bursting. 

bnbdnb's picture

Just issue 1000 yr treasury notes.

vxpatel's picture

LIEMORE

 

'Stressed' Bank of England official stabbed self to death A Bank of England manager stabbed himself to death due to the over-whelming pressure he was under at work, an inquest has heard.

 

http://bbc-worldnews.net/2012/07/bank-of-england-boss-suicide-induced-by-cost-cutting/

EmileLargo's picture

So the IMF now says what Kyle Bass was saying in 2009?

 

 

BillyBoy22's picture

Looks like Kyle Bass is gonna turn his little hedgefun into a mega player.

Snakeeyes's picture

Absolutely! But when the IMF holds up Argentina as the shining example of a growing economy, you have to shake your head.

http://confoundedinterest.wordpress.com/2012/07/16/imf-declares-spain-and-japan-as-zombielands-u-s-suffering-from-rigor-mortis-3rd-place/

Snakeeyes's picture

US GETS BRONZE MEDAL!!!!!!!!!!!!!!!!!!!!

web bot's picture

You know, whenever anyone talks about the decoupling of Gold to the US dollar, they throw up the idea as progressive. Without it, we'd still be living in caves, or log cabins.

I'm not as convinced as I use to be as to the evils of the gold standard. By today's world, yes it is not practical, but if the gold standard was not done away with, we'd likely be in a very, very, very different world today.

But let's just say that if Gold was never decoupled... the likely results would have been "limited" globalization, perhaps a lower standard of living and a slower crawl  of the 3rd world out of poverty. And oh... likely the abatement of China's rise to global ascension. No, nobody talks about this though.

 

robertocarlos's picture

We ran out of unlimited resources. That's the only thing stopping us. And it still isn't over. We couldn't build what we have under a gold standard. Now if we just tweak things a bit we could have our heaven on earth.

Hobbleknee's picture

Why is a gold standard not practical?  It doesn't mean everyone is walking around with sacks of gold coins; it means paper money would actually be backed by something besides government fiat.  It means the government can't print us into poverty because at anytime, people can redeem their warehouse receipts for real gold.

Hobbleknee's picture

Ctrl + Alt + Delete, bitchez!

PulpCutter's picture

I'm confused.  In this article, you say US total debt/GDP will stabilize at 1.13%.  But in the post just a few below it, you claim we're growing "total marketable US debt" at 21% per year, while GDP is growing at 1.1% per year.

Which is it?

http://www.zerohedge.com/news/problem-nutshell-annualized-gdp-growth-1-a...