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Pick Your Debt Poison

Tyler Durden's picture




 

When it comes to estimating the biggest threat to the global financial system, by far the biggest threat and biggest unknown is the total Financial debt in the system, for the simple reason that as we have been showing for over two years, it is simply impossible to quantify just what the real level of such debt in the developed world truly is, especially when one accounts for shadow liabilities, rehypothecated collateral, derivatives, and all those other footnotes in financial statements that only become relevant when daisy-chained collateral links start collapsing following the default of one or more financial entities, and when gross becomes net. What we can, however, do is show the other three major categories of debt currently existing in the system: Government, Corporate and Household debt, as they are distributed among the "developed" countries. We also know what the tresholds are beyond which the debt becomes unsustainable. In the words of the BIS: "For government debt,  the threshold is around 85% of GDP... When corporate debt goes beyond 90% of GDP, it becomes a drag on growth. And for household debt, we report a threshold around 85% of GDP, although the impact is very imprecisely estimated."

So in light of all these various thresholds, where do the "developed countries" of the world stack up? It's not pretty.

Total Government Debt distribution:

Total Corporate Debt distribution:

Total Household Debt distribution:

And one final chart showing all three non-financial debt categories combined. We leave conclusions to the reader.

Source: Metis Risk Consulting, Feasta

 

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Tue, 07/17/2012 - 21:29 | 2626624 GetZeeGold
GetZeeGold's picture

 

 

I'll have a vodka tonic......hold the poison.

 

Tue, 07/17/2012 - 21:37 | 2626640 The Monkey
The Monkey's picture

Isn't the huge amount of debt overall, esp financial debt, big time bullish? If we are literally on the precipice it means central banks will hold the pedal will be on the metal everytime, all the time.

Tue, 07/17/2012 - 21:44 | 2626656 GetZeeGold
GetZeeGold's picture

 

 

Isn't the huge amount of debt overall, esp financial debt, big time bullish?

 

Another $300.000 spent on an Economics degree......shot straight to hell.

 

Tue, 07/17/2012 - 22:00 | 2626680 Yes_Questions
Yes_Questions's picture

 

 

Econ Pedigrees are measured to the thousandth of a dollar now?

 

That may be a sign of progress.

Especially if they go for only three places to the left now too.

..

 

Wed, 07/18/2012 - 00:01 | 2626959 Dr Benway
Dr Benway's picture

Said it once, I'll say it again.

 

Crossholdings are a MAJOR source of synthetic leverage.

 

Companies buy each other's shares to support share prices, and are in effect lending each other money in a way that shows up in no metrics.

Wed, 07/18/2012 - 00:19 | 2627007 AldousHuxley
AldousHuxley's picture

companies buy each other's products to report on wall st. as new revenue.

 

japanese banks lent each other money.

 

libor is international banks lending each other money.

 

We have a problem when companies won't even buy each other's shares/products because of lack of trust.

Wed, 07/18/2012 - 00:20 | 2627009 Oh regional Indian
Oh regional Indian's picture

Dr. b, then extrapolate to Government cross holdings. 

Think Sovereign Debt and THEN think synthetic leverage. That is mind-boggling. Especially when FED by a dark pool of liquidity.

Debt Trap, Death Trap...

ori

/war-inc/

Wed, 07/18/2012 - 00:53 | 2627065 AldousHuxley
AldousHuxley's picture

How do you calculate debt as % of GDP when GDP is NEGATIVE or NEAR ZERO?

 

what's more important is forecasted growth of debt VS growth of GDP

 

 

Wed, 07/18/2012 - 01:13 | 2627089 FreedomGuy
FreedomGuy's picture

I would add that putting government spending into the GDP formula is a major mistake, as well. By spending, including deficit spending governments can artificially inflate their GDP.

I would subtract government spending for a net GDP and then the whole world would look immensely different and more accurate. Deficit spending would actually decrease GDP figures, as it should. Governments would stop "shovel ready" stimulus that often amounts to shoveling a hole and filling it in again as if that is any kind of productivity you would want in your GDP numbers.

Wed, 07/18/2012 - 01:45 | 2627120 cranky-old-geezer
cranky-old-geezer's picture

 

 

Sorry folks, but the debt problem is a distraction. 

Nobody's gonna default.   Central banks will end up printing ALL the currency needed to keep funding ALL the sovereign debt generated.

The REAL problem is CURRENCY DEBASEMENT and eventual CURRENCY COLLAPSE, specifically from all the PRINTING needed to fund all the debt generated.

Of course nobody talks about currency debasement and collapse.  

Fed says we have 1.5% inflation.  Bull-fucking-shit.  How 'bout 15% inflation.  That's more like it.

Say what? It's all going into reserve accounts at the Fed, not circulating in the economy?

Nope, not what's printed to fund new government debt.  That shit goes right into the economy.  Nearly $2 trillion a year now going right into the economy thru government deficit borrowing & spending.

No, rising sovereign debt isn't the problem, it'll never be defaulted on.

Currency debasement and collapse is the real problem ...that nobody talks about ...except a few of us here at ZH ...like me.

Wed, 07/18/2012 - 02:36 | 2627166 Judge Arrow
Judge Arrow's picture

Bailiff, the Geezer has made his case - the debt is a number, currency is what you have at the liquor store - that sounds like a verdict to me - now I need a drink, hey, can you spot me a Ben till next week?

Wed, 07/18/2012 - 02:46 | 2627177 All Risk No Reward
All Risk No Reward's picture

I'll take the counter argument - and please take the time to think it through before going visceral on me.

The government does not control the money supply - a private banking cartel does.  Especially the meg banking interests that cotnrol the Federal Reserve System (Bernanke is a front man doing the bidding of the real controllers "behind the curtain," as it were).

Who owns the debt?  Oh, primarily the same people who control the Federal Reserve.

Who cotnrols trillions in cash directly and throught their multi-national front corporations?  Oh, primarily the same people who control the Federal Reserve.

So your argument is that these people are going to eliminate their own wealth and bail out those they've criminally indebted?

Really?

So, why haven't they done this yet?  Why would they since society is allowing them to offload as much of their bad debt as possible onto us and allowing them to indebt society to the tune of trillions of dollars while they pocket the proceeds?

The point is that game won't last forever...  and when it ends, what will the private banking cartel do?

1. Hyperinflate and bust themselves to bail out the debtors they have by the short hairs?

2. Allow interest rates to go up, suck the credit from the system, bust the debtors, roll up planet Earth under their multinational front corporations, eliminate their competititon...  with out a care in the world as they are TBTF&J?

What would you do in their shows?  Why?

Oh, and these same people who will decide our monetary fate hand picked, financed and promoted all their operatives currently in office, they control the bureaucracy, they control the media...  and are handing out 3.6% 30 year loans as I type.

Now you might understand why the Rockefeller Foundation brought Mises over to the U.S. and funded his work.

"The best way to control the opposition is lead it [or finance a point of view that is to your benefit, anyway]."
~Vladimir Lenin

Wed, 07/18/2012 - 04:37 | 2627249 zhandax
zhandax's picture

Another wasted econ degree.  Just who do you think the major holders of the US debt are?  The Chinese?  The banks?  Trading bandits, all.  The US .gov is over 15 trillion in the hole.  The Chinese average about 1 trillion in of that.  On a bad auction, the i-banks may have to sit on 5 trillion, but it is unloaded on the muppets, or those in need of collateral, within a week or so.  The real holders of the US debt are those who age.  Yes, if you are one of the unfortunate ones who actually get older, you are a prime lemming at the US debt line.  You remember that bogus Social Security Trust Fund?  What, exactly, do you think the politicians stuffed it full of when they looted the fund?  Their corpses would still be hanging from street lights if they had actually stolen the money.  No, they exchanged it for good old fashioned "Full Faith and Credit" US debt.  Why in hell politicians aren't swinging from lamp posts today defies all logic, but there you go.

Thu, 07/19/2012 - 02:22 | 2630890 All Risk No Reward
All Risk No Reward's picture

>>Just who do you think the major holders of the US debt are?  The Chinese?  The banks?  Trading bandits, all.<<

The richest people on the planet - national boundaries are for chumps, or haven't you read the globalist's own writings?

The same crowd that cotnrols the mega banks and the multinationals and the Federal Reserve System and who will use it in order to further their interests, not the interests of the lowly debtor class.

>>The US .gov is over 15 trillion in the hole.  The Chinese average about 1 trillion in of that.<<

Still stuck on national boundaries?  Money Power is international...  they know no national pride and have no allegiance to a nation state.  In fact, they want to destroy nation states.  Again, read their documents that state this openly.

Tragedy and Hope is a good book to read to begin to get an idea how the world really runs.

The bankster's Federal Reserve owns more treasuries than any other entity, in case you didn't know.

>>On a bad auction, the i-banks may have to sit on 5 trillion, but it is unloaded on the muppets, or those in need of collateral, within a week or so.<<

Yes, the poor indebted serfs own all their own debt...  oh wait!  They don't!  Most people are big time debtors, my friend, and the debt receipt "money" is concentrated in the hands of the few.

>>The real holders of the US debt are those who age.  Yes, if you are one of the unfortunate ones who actually get older, you are a prime lemming at the US debt line.  You remember that bogus Social Security Trust Fund?  What, exactly, do you think the politicians stuffed it full of when they looted the fund?  Their corpses would still be hanging from street lights if they had actually stolen the money.  No, they exchanged it for good old fashioned "Full Faith and Credit" US debt.<<

The social engineering that causes you to be blind to a small group of people who own most of the debt receipts while society is saturated with debt has worked exceptionally well with you.  Shake it off!  Here's some help...

Debt Money Tyranny...

http://www.keepandshare.com/doc/3325954/debt-dollar-tyranny-2-54k?tr=77

Big Finance Capital is the "club" with the most money and debt ownership and political control, not grandpa and grandma.  The latter are bit players...  as evidenced by the fact they will go to jail for committing crimes. Jail is for little people, if you know what I mean.

>>Why in hell politicians aren't swinging from lamp posts today defies all logic, but there you go.<<

We agree on this, but our reasons are probably different in some respects.

Good luck - we need it.

Thu, 07/19/2012 - 06:59 | 2631038 zhandax
zhandax's picture

Those "richest people on the planet" only bought it to hold momentarily to scarf off the value of "most benefit to those closest to it's creation".  Then, they flipped it.  They don't want to own this shit anymore than you do.

Thu, 07/19/2012 - 03:21 | 2630917 cranky-old-geezer
cranky-old-geezer's picture

 

 

I'll take the counter argument

There is no valid counter-argument.  

This stuff is pretty simple.  When the money supply expands way faster than GDP, as it is now to fund rapidly expanding government debt, the value of the currency is seriously diluted, as it has over the past 4 years, around 50%.

That's extreme inflation with it's corresponding dilution of currency value, just like doubling the number of shares of stock of a company dilutes the value of each share 50%, same concept.

The rapidly growing govt debt funded by all this currency printing is meaningless, it'll never be defaulted on, just rolled over and over indefinitely.

These are simple things not requiring long complicated explanations.  Any Econ 101 & 102 student who is awake in class can understand these simple things.

Long complicated explanations are attempts to divert attention from where the real problem is.

In the bigger picture what's happening is all the wealth of the nation is being transferred to the government and banks.  The fiat currency printed on a printing press is just the vehicle for transferring all the wealth of the nation to the government and banks.

Thu, 07/19/2012 - 03:37 | 2630925 Ghordius
Ghordius's picture

+1 what you are trying to explain is difficult for many to understand because the real inflation, i.e. the increase of the monetary base, usually needs at least 18 months to translate into increases of prices, and that this increase of prices can be very different in the various goods and assets, for a while. Add the countereffect of deleveraging, and the picture can be murky for years.

This is very counterintuitive for who expects direct, fast and clear effects and reactions from every action. Add the mindset of the trader that is only interested in the short term effects, and you could talk as well to walls.

------

btw, I disagree with the "sustainable level" of debt/GDP in the article, this is against the Japanese and other country's experience for decades. I understand this ties in with your "it will be rolled over" statement - on which I broadly agree.

Wed, 07/18/2012 - 02:55 | 2627184 verum quod lies
verum quod lies's picture

Even though Bloomberg warned: “Iceland is warning Greece and Ireland not to copy its recovery model even though the Atlantic island managed a return to international debt markets less than three years after letting its banks default on $85 billion.” And as reported even by the PWTB (the Economist): “MOST came quietly in the end. After a tortuous process, the majority of private holders of Greek government bonds had agreed by March 9th to trade in their bonds for new longer-dated ones with less than half the face value of the old ones and a low interest rate. The biggest sovereign-debt restructuring in history allowed Greece to wipe some €100 billion ($130 billion) from its debts of around €350 billion. It will also be the first test of the resilience of the financial system ...”

Therefore, default and restructuring (default being part of that process) did and will likely happen. Inflation, sure, why not; and note that inflation is a form of taxation/default (i.e., default in the sense of promising one thing economically yet delivering substantially less or even nothing in some cases). But let’s not make silly statements when so far the score is default/restructuring 2 and massive inflation 0. I too think this shortly will turn into high to massive inflation overall, but “nobody's gonna default” is just a silly thing to make an absolute statement about. Sure, there will be a tendency toward high and even hyper-inflation (and I too think U.S. inflation is underreported), but don’t dismiss default as not being in the cards for any sovereign.

 

Wed, 07/18/2012 - 06:39 | 2627353 negative rates
negative rates's picture

Even congress knows we are currently at pace to spend $45 trillion in the next 10 years, that my friend is inflation. So Ben and the cons talk about deflation, so when they want to pull the money trigger it's in the holster and right by their side. They are buttering up the extension bread now for a last second launch from the fiscal cliff later this year.

Wed, 07/18/2012 - 06:49 | 2627370 geblis
geblis's picture

But if there were no debts, there would be no need to print!

Wed, 07/18/2012 - 10:11 | 2627847 negative rates
negative rates's picture

Its too late for that now, the further you lokk into US history, you will find the gvt was basically founded on debt, and then got addicted to it to keep the free doom alive and well.

Wed, 07/18/2012 - 02:18 | 2627143 The Navigator
The Navigator's picture

US Debt is $15Tril, closing in on $16Tril - US GDP is $15Tril, maybe a little less - the debt to GDP ratio is about 105%, meaning we owe more than we make in a year.

I think you are thinking of the 1.6% growth rate which is not used in this ratio/calculation.

Wed, 07/18/2012 - 03:23 | 2627205 tenpanhandle
tenpanhandle's picture

Exactly right.  The calculation is based on GDP not the growth (or lack thereof) of GDP.  While I've got the floor I'd like to pose a question and point or two: 

The US uses falsefied unemployment numbers and phoney inflation stats as compared to the reporting by other countries for their own unemployment and inflation numbers.  The US does not count unfunded libilities as part of their accumulated debt and therefore the US debt numbers in this operation do not include these immense unfolding amounts.  Do all the other countries listed in this exercise also not include unfunded liabilities in their total debt figures?

In the US and other countries with huge unfunded liabilities this should add another tier or two to this equation and put the whole concept of any kind of future control and management into the realm of the absurd.

Wed, 07/18/2012 - 05:09 | 2627291 kraschenbern
kraschenbern's picture

GDP <=0   Singularity!

Wed, 07/18/2012 - 06:56 | 2627377 Thamesford
Thamesford's picture

Debt to income would be more meaningful.

Wed, 07/18/2012 - 06:42 | 2627358 neidermeyer
neidermeyer's picture

Dr. Benway ,

 

You are 1000% correct ,, that is THE way that lack of capital is hidden ,, Bank "A" buys worthless debt assetts from Bank "B"  and Bank "A" reciprocates. In the good ole S&L crisis we saw that occurring in almost every failure, usually with shares in worthless companies that weren't publicly traded or in real estate.

Wed, 07/18/2012 - 04:30 | 2627261 StychoKiller
StychoKiller's picture

Euro denizens use periods in place of commas -- craazy, no?

Tue, 07/17/2012 - 22:24 | 2626730 soccerballtux
soccerballtux's picture

^ask Japan how it worked for them?? Not well.

unrelated, I have a rant for the people that complain about the lack of work ethic in young folks today.

jobs don't pay like they used to.

 

$12 to eat out, $13 to see a movie, $3.50/g gas, 5-digits-per-year-college-tuition, why bother? Take bus, play video games, buy Ice Cream when you get a chance. Who needs more? Older people say "eehhh??? I bet that taught you the value of a dollar, son!" Rather, my minimum wage job taught me the value of an hour of freedom. When I tell older people that they scowl at me, suck it old farts, the world sucks now and you wouldn't work an 8 hour shift at McD taking new orders for the same damn food every 20 seconds for minimum wage either, so get off my case.

I make an engineer's salary now. Still would make same decision given the chance. Those summers of working in high school are summers I'm never going to get back. Work work work till you die. No thanks.

I know better paying high school jobs exist but I was very bad at thinking "out of the box", hence engineering now. If I'm engineering now and couldn't figure out the better jobs back then, what are the poor stupid people that can't even go to college supposed to do? We shipped all the stupid-people jobs off to China.....that was a bad decision for us long term, should have been taxing imports from non-1st-world countries (e.g. taxing unless imported from countries that have similar wages as us, such as Japan, UK, South Korea, Taiwan, etc) from the getgo. Now we'll just pay for the correction through welfare meanwhile encouraging entitlement. If you feel entitled to having a job, then at least you're working.

 

rant over...

Tue, 07/17/2012 - 22:38 | 2626764 CrockettAlmanac.com
CrockettAlmanac.com's picture

 

 When I tell older people that they scowl at me, suck it old farts, the world sucks now and you wouldn't work an 8 hour shift at McD taking new orders for the same damn food every 20 seconds for minimum wage either, so get off my case.

 

Lots of folks have been willing to work at McDonald's for the past 60 years or so. That's how folks with few skills and little experience get skills and experience. It's the way of the world not a personal attack upon you.

Tue, 07/17/2012 - 23:44 | 2626902 Dr Benway
Dr Benway's picture

I know for a fact that most people in office jobs spend most of the days doing nothing.

 

Coffees, chatting, surfing, etc etc etc EASILY takes up 50% if not more of the average office workers time.

 

So it rankles me too when I hear people in sinecures complaining young people won't work hard enough. Those cushy office jobs with cushy salaries will become rarer and rarer, so at least STFU and count your blessings is what I say to those people.

Wed, 07/18/2012 - 00:16 | 2626995 CrockettAlmanac.com
CrockettAlmanac.com's picture

I volunteer at a local historic site. In June I was helping set up tents for the annual Strawberry Festival with four other volunteers. Our ages are 85, 66, 47, 16 and 8. There were about a dozen teenagers who were paid to be there by the municipality to cut the weeds. While we volunteers worked the tax feeding teens played hacky sack. Screwing around is not exclusive to any age group or workplace.

Wed, 07/18/2012 - 00:21 | 2627012 AldousHuxley
AldousHuxley's picture

don't measure "hard work" by income/work

measure it by lifestyle/work

 

middleclass lifestyle = education + housing + healthcare

 

yeah....young kids today are getting screwed. So what if they make twice a much for little more slacking??? The same old house is going for 4 times as much.

Wed, 07/18/2012 - 04:49 | 2627278 zhandax
zhandax's picture

Young kids today are being screwed by the same system who taught them, and it's our fault that we didn't throw the assholes out of office and demand that the federal government get the fuck out of the education business.

Wed, 07/18/2012 - 00:57 | 2627071 Dr Benway
Dr Benway's picture

Look, I wasn't trying to say that elders slack off more than younguns. I was trying to say that the elders have sucked the teat of the gravy train in a plethora of ways while passing on the debt to these younguns. Like Aldous pointed out above, its the younguns that will have to pay many of the debts of the old.

 

So let them play their hackysack.

Wed, 07/18/2012 - 11:39 | 2628269 CrockettAlmanac.com
CrockettAlmanac.com's picture

 

 

So let them play their hackysack.

 

But I'm not rich, never was and I am taxed to pay for these teen "workers." If you want to subsidize their fun then do it yourself.

Wed, 07/18/2012 - 04:15 | 2627246 HungrySeagull
HungrySeagull's picture

I tossed meat off the cooker into a Mc Donald's line.

It was one of the shortest times I ever spent at one employer.

And as a Customer I don't do much better. I usually wait until some old wrinkled fuck gets behind the cash register because I know that person will focus and accurately take my order instead of those giggly spaced out tarts.

Tue, 07/17/2012 - 23:36 | 2626879 WillyGroper
WillyGroper's picture

so you think they can't/aren't outsourcing engineering jobs here? still in the box eh? 

Wed, 07/18/2012 - 01:02 | 2627076 James_Cole
James_Cole's picture

If you have a Msc (or higher, extra $ if biomedical) engineering degree from a decent school you will be in demand in the US & around the world, I know this personally. Not many people can get by at that level though. 

Bsc might not do it, there are still lots of labs hiring here though.

Wed, 07/18/2012 - 04:28 | 2627260 natty light
natty light's picture

Thank you, sir.

Tue, 07/17/2012 - 23:33 | 2626873 ReactionToClose...
ReactionToClosedMinds's picture

very good (funny > 'hold the poison')) ... great set of summation charts ZH ..... gives one all the perspective one needs.

This is going to be one hell of a Fall ....... whether the equity markets (or Treasurys, commodities or whatever) go up or down .... there are more simultaneous roller-coaster dynamics in play than I can ever remember in my aging lifetime.  This makes the Cold War look simple by any relative comparison .. since that had the nuclear threat overhang .. but it was much more straightforward since the bolshviks made it obvious to everyone ...even the AFL-CIO ...except the hard left

Did some Chinese person curse the West?  May you live in interesting times! 

Wed, 07/18/2012 - 01:26 | 2627100 AldousHuxley
AldousHuxley's picture

speaking of charts...

 

Spanish Stock MArket historical

http://www.tradingeconomics.com/chart.png?s=ibex&d1=19870101&d2=20120731

Wed, 07/18/2012 - 04:14 | 2627243 cossack55
cossack55's picture

Looks like they need to tweak their algos.

Tue, 07/17/2012 - 21:38 | 2626643 Snidley Whipsnae
Snidley Whipsnae's picture

Household debt? Does household debt include the gambling losses by bankers/FIRE sector that are using gov stooges to dump them onto households/taxpayers?

It's only a matter of time untill all the losses of the FIRE sector become 'household debt'....

Tue, 07/17/2012 - 22:12 | 2626711 boogerbently
boogerbently's picture

This may be the ADVANTAGE to the lack of transparency. We'll never know how bad it is.....so it's easier to fix or deny!

Tue, 07/17/2012 - 21:40 | 2626650 Max Fischer
Max Fischer's picture

Whenever you use "percentage of GDP" during the worst global recession in modern history, you're going to get skewed numbers.

Tue, 07/17/2012 - 21:51 | 2626667 Aziz
Aziz's picture

As a percentage of GDP gives a relatively clean estimate of debt as a percentage of total economic activity. 

If we used a percentage of potential GDP like I think Krugman and DeLong want us to, that is living in fantasy land. We have the GDP that we have.

Tue, 07/17/2012 - 21:54 | 2626672 Yes_Questions
Yes_Questions's picture

 

 

We have the GDP that we're told we have.

Tue, 07/17/2012 - 22:20 | 2626728 Bollixed
Bollixed's picture

Ah yes, the old Ghost Domestic Product...

Tue, 07/17/2012 - 22:42 | 2626776 CrockettAlmanac.com
CrockettAlmanac.com's picture

Nice.

Tue, 07/17/2012 - 22:15 | 2626715 boogerbently
boogerbently's picture

Yeah,

we don't have too high of debt.....we have too low a GDP. (I'm not too fat, I'm just too short for my weight)!!!

Tue, 07/17/2012 - 21:55 | 2626674 Pure Evil
Pure Evil's picture

I guess you have better graphs and charts that you want to share with us.

Tue, 07/17/2012 - 22:42 | 2626775 TheFourthStooge-ing
TheFourthStooge-ing's picture

Max, Max, Max....let me try an explanation that you might find easier to understand.

Let's say, for example, that an evening's enjoyment for you is getting a buzz on by drinking a flask of Wild Irish Rose, a six-pack of Michelob, and a quart of Stroh's, followed by posting rants in the ZH comments.

One day around the end of the month you find your snap card out of credit, so for cash you go around town to four different blood/plasma centers, being drained by a pint at each location. You're feeling a little woozy, but you now have enough to buy some Wild Irish Rose, a six-pack of Michelob, and a quart of Stroh's.

You're anticipating another evening of clever insight and irrefutable demagoguery on ZH, but in your weakened condition you end up getting so smashed that you vomit all over your mother, pass out on her couch, and lose control of your bodily functions.

The "percentage of GDP" numbers are like that. They're not really skewed because the economy's weakened condition amplifies the effects of the debt, much like getting all boozed up after draining two quarts of blood.

Hope that helps.

Wed, 07/18/2012 - 00:29 | 2627021 wandstrasse
wandstrasse's picture

but you forgot to draw a 'sustainable threshold', this is circa above a flask of Wild Irish Rose, a six-pack of Michelob, a quart of Stroh's - but 'posting rants in ZH comments' is already above that threshold, then it becomes unsustainable. there, fixed it for you.

 

Wed, 07/18/2012 - 02:43 | 2627173 Judge Arrow
Judge Arrow's picture

Tell me about rabbits and the booze again,George, I like the boozey part - the Strohs, I like Strohs, hey George you gonna throw up on your momma, George?

Wed, 07/18/2012 - 03:36 | 2627218 tenpanhandle
tenpanhandle's picture

You're skewed, we're screwed.  So use the best historic GDP numbers against the current real debt numbers.   It's not like you're any better off with just two bullets in your head instead of three.

Tue, 07/17/2012 - 21:48 | 2626660 bigkahuna
bigkahuna's picture

candy striper, meet john holmes...

Tue, 07/17/2012 - 21:49 | 2626664 Yes_Questions
Yes_Questions's picture

 

 

Well duh, just get UK to 213 and reset the benchmark.

 

CrediFiatism.

 

 

Tue, 07/17/2012 - 21:50 | 2626666 hardcleareye
hardcleareye's picture

“Minsky moment"

"...his second great insight is into the dynamics of phase transitions: the famous movement from the hedge position to the speculative position to the intrinsically unsustainable, doomed to collapse ponzi position which arises from within the system and is subject actually to formalization in the endogenous instabilities of non-linear dynamical models."

 

http://www.mpettis.com/2012/07/17/the-unacceptable-behavior-of-the-marke...

Tue, 07/17/2012 - 21:57 | 2626679 El
El's picture

How is it that Japan has held on this long? Is the fact that they have a testament to us being able to kick the can for the next two decades?

Tue, 07/17/2012 - 22:14 | 2626713 seek
seek's picture

Very compliant, homogenous population, banks and corps that buy gov't debt as told, and a protectionist economy.

And no, it's not a testament to us. In this case, the Japanese are the exception, and when it blows up, they just have farther to fall.

Also, Japan has had a virtually stagnant economy for two decades -- make that happen globally for twenty years, and the world will be a very ugly place, even without an overt collapse.

Tue, 07/17/2012 - 22:33 | 2626754 boogerbently
boogerbently's picture

The emporers new clothes.

We'll all be "rich" at a lower level.

In the land of the blind, the one-eyed man is king!

Wed, 07/18/2012 - 03:43 | 2627223 tenpanhandle
tenpanhandle's picture

In the land of the one eyed king - you only have to pay half taxes.

Wed, 07/18/2012 - 00:29 | 2627016 Colonel
Colonel's picture

And you know Japan's stagflation played a role in the Fukishima reactor meltdown. Wait, didn't the Bernanke "advise" the Japanese too?

Tue, 07/17/2012 - 22:34 | 2626755 Terrorist
Terrorist's picture

No defense spending

Wed, 07/18/2012 - 02:26 | 2627153 The Navigator
The Navigator's picture

Japan has been able to hold on this long because it's internal debt (owed to the Japanese people) not external debt (i.e. Treasuries held by China or Saudi Arabia).

Tue, 07/17/2012 - 22:05 | 2626688 Pure Evil
Pure Evil's picture

How is it that the Irish have just about out-spent everyone.

Must be all those Guinness pints.

Drunken louts!

Drink Up Muckers

Tue, 07/17/2012 - 22:45 | 2626777 CrockettAlmanac.com
CrockettAlmanac.com's picture

Erin go broke.

Wed, 07/18/2012 - 02:31 | 2627158 Marigold
Marigold's picture

Because they became arrogant dip shits and convinced themselves that they were richer than the rest of Europeans after building 220 K houses that nobody lives in which they financed by borrowed fiat money from corrupt banks such as Anglo Irish. And Paddy still don't get it !

Wed, 07/18/2012 - 03:45 | 2627225 tenpanhandle
tenpanhandle's picture

Who are you talking about?

Wed, 07/18/2012 - 02:55 | 2627183 Judge Arrow
Judge Arrow's picture

I resemble that remark. And may we all look so blithe and dapper as when we currency debase ourselves, as Mr. Geezer pointed out some posts ago, well, no matter, it costs money to go to hell and by god, are you saying we should let the devil win? Drink up, dear Guppy, they's calling us names, agin.

Tue, 07/17/2012 - 22:01 | 2626690 Atomizer
Atomizer's picture

 

 

The new Globalization region is the African Union (AU). Just tell those poverty stricken, uneducated fucks that their pot of gold commences once they sign onto the newly improved Special Investment Vehicle (SIV) debt repayment program. Central planners will be relieved. Another set of hopeless promises to build new bridges, roads, schooling, employment and affordable healthcare that will arrive in a bill that can never be paid back.  

The time has come to ratchet up the blow dart gun attacks on the Niger Delta pipelines. Those terrorist that don’t comply to the new banking offer will be exposed to daily sound bites thru our MSM muppet filter. 

Nigerian President Offers Amnesty to Militants - 2009

 

/sarc 

Tue, 07/17/2012 - 22:11 | 2626707 UP Forester
UP Forester's picture

So, uh, who exactly holds the other side of all this debt?

Tue, 07/17/2012 - 22:19 | 2626725 boogerbently
boogerbently's picture

That's what I've been asking.

IF TRILLION$$$ were "lost", where are they???

Those dollars didn't just DISAPPEAR.

If someone LOST them....then SOMEONE made them.

Where did those dollars go......TRILLIONS of them.

Wed, 07/18/2012 - 00:48 | 2627056 John Sixpack
John Sixpack's picture

Held down the 'delete' key.......poof!

Wed, 07/18/2012 - 04:42 | 2627269 doomandbloom
doomandbloom's picture

.....aaand its gone...

Tue, 07/17/2012 - 22:16 | 2626717 boogerbently
boogerbently's picture

Can't we just get someone to "manipulate" the global debt to zero ??

Tue, 07/17/2012 - 23:04 | 2626806 sosoome
sosoome's picture

manipulation's against the law...you should know that.

Tue, 07/17/2012 - 23:58 | 2626949 boogerbently
boogerbently's picture

Not unless you're caught....

Well, even if you admit it......

"against the law" is a relative term....

NOTHING is DEFINITELY against the law, anymore......except maybe killing babies......well, wait a minute....

Tue, 07/17/2012 - 23:54 | 2626937 Poor Grogman
Poor Grogman's picture

Now you are outside the matrix, better off to forget those crazy thoughts altogether.

The debt could be gone by tomorrow afternoon if need be but that might harm the basic control and enrichment method of the worldwide debt ponzi, we couldn't have that now could we?

Is everyone having fun yet?

Wed, 07/18/2012 - 00:03 | 2626971 boogerbently
boogerbently's picture

Silly me.

I was just thinking that was a better alternative than the "traditional" let's have a World War cure for our math problems.

Maybe a computer generated "fix." I hear the internet is all the rage, now.

Wed, 07/18/2012 - 02:15 | 2627140 Poor Grogman
Poor Grogman's picture

the "traditional" let's have a World War cure for our math problems

 

Now just stare vacantly straight ahead and repeat after me

"they hate us for our freedoms"

 

feeling any better now?

Tue, 07/17/2012 - 22:20 | 2626719 bob_dabolina
bob_dabolina's picture

Something made this country great. If you've ever worked 16 hour days, lived within your means and led a responsible life, good for you. You probably find yourself living in a country mired in debt and choking regulation, you didn't do that, someone did it for you. I just get vexed when people worry about their future and that of their progeny, y'all probably think you're real smart, well lemme tell y'all somethin - there's a lot of smart people out there. You probably think you worked real hard to get where you're at - well lemme tell ya'll something - there's a lot of people who don't work at all and are doing just fine thanks to your hardwork and tax dollars. We subsidize loans to people who aren't qualified for college, build roads to nowhere, highspeed rails in states that are going bankrupt, and accumulated debt that will never be paid back. We accomplished this as a nation; together.

From the opening monologue of Newsroom:

And with a straight face you’re going to tell students that America is so star spangled awesome that we’re the only ones in the world that have freedom? Canada has freedom. Japan has freedom. The UK, France, Italy, Germany, Spain, Australia, BELGIUM has freedom. 

So, 207 sovereign states in the world, 180 of them have freedom. 

And you, sorority girl, just in case you accidentally wander into a voting booth one day there’s somethings you should know. One of them is there’s absolutely no evidence to support the statement that we’re the greatest country in the world. We’re 7th in literacy, 27th in math, 22nd in science, 49th in life expectancy, 178th in infant mortality, 3rd in median household income, Number 4 in labor force and Number 4 in exports, we lead the world in only three categories: Number of incarcerated citizens per capita, number of adults who believe angels are real, and defense spending where spend more than the next 26 countries combined, 25 of whom are allies.

Tue, 07/17/2012 - 22:21 | 2626732 boogerbently
boogerbently's picture

Stop it....I'm gettin' all misty.

Tue, 07/17/2012 - 23:30 | 2626866 Bobportlandor
Bobportlandor's picture

I was thinking same.

But I will note it's 193 in UN out of a total of 195 countries with one more possible.

That's the one we should hit up for a loan.

Tue, 07/17/2012 - 23:46 | 2626914 AssFire
AssFire's picture

I would load my weapon and follow a man like Bob.

Wed, 07/18/2012 - 05:51 | 2627324 bob_dabolina
bob_dabolina's picture

The list contains 207 entries. The states are divided using two distinct methods

http://en.wikipedia.org/wiki/List_of_sovereign_states

*Note the quote stated said soverign states, not countries

Tue, 07/17/2012 - 22:25 | 2626741 boogerbently
boogerbently's picture

We need to "incarcerate" more of them bastards that don't believe in angels!!

Tue, 07/17/2012 - 22:27 | 2626744 Mentaliusanything
Mentaliusanything's picture

You forgot SNAP Bob, 47,000,000 people feed daily electronically rather than have to line up in a soup line. Thats World class and outstanding as a curtain call

Wed, 07/18/2012 - 00:52 | 2627061 John Sixpack
John Sixpack's picture

Wonderful country we're living in today.  SNAP/EBT are direct payments to corporations.  Users are only the mechanism to funnel the money.

Wed, 07/18/2012 - 04:01 | 2627232 tenpanhandle
tenpanhandle's picture

Sounds snappy but not really true.  Users are users and they are the ones being paid off.  Paid to vote democrat and to not run amuck.  Well at least they vote democrat.  The dough ends up in myriad places, including your local sacred Indian casino.

Wed, 07/18/2012 - 05:56 | 2627326 bob_dabolina
bob_dabolina's picture

I think what he was referring to is that corporations and the Dept. of Ag lobby for more food stamps.....why?

The U.S government borrows that money that funds EBT/SNAP. The user gets whatever it is $250 bucks. They take that money and buy shit like for example Kraft products. This increases profits to big corporations like Kraft, Coke, etc.

Tue, 07/17/2012 - 23:13 | 2626831 kito
kito's picture

spectacular bob...here is the link
http://www.youtube.com/watch?v=Rpn0vh2Rj0Y

Wed, 07/18/2012 - 06:27 | 2627345 AnAnonymous
AnAnonymous's picture

Something made this country great.

____________________

Yep, and that is theft. As long as this country will keep opportunities to thieve, this country will remain great.

Not so much for the thieved but it has been the case since the inception of this country.

Wed, 07/18/2012 - 06:42 | 2627359 TheFourthStooge-ing
TheFourthStooge-ing's picture

AnAnonymous, in a moment of honesty, said:

Yep, and that is theft. As long as this country will keep opportunities to thieve, this country will remain great.

Not so much for the thieved but it has been the case since the inception of this country.

...and, of course, when you say "this country", you are referring to your native land.

How nice of you to finally admit to the truth for a change.

Wed, 07/18/2012 - 06:48 | 2627367 AnAnonymous
AnAnonymous's picture

Putting words into mouth, just after quoting. No shame as required by US citizenism.

'Americans' can not discuss 'Americanism', they have to flush it all onto an exterior to hide the systemics brought by 'Americanism'

No difference between an 'American' elite and its base, no matter what that 'American' base claims.

They think the same and wish to behave the same.

Alas, alas, alas, position of power are singular.
One has to rule, the others to obey.

The tragedy of 'Americanism'

Wed, 07/18/2012 - 07:09 | 2627392 TheFourthStooge-ing
TheFourthStooge-ing's picture

AnAnonymous, wrong again:

Putting words into mouth, just after quoting. No shame as required by US citizenism.

Yes, sure. Funny how you always point out explicitly US of A as responsible for all evil in the world, yet in this instance one notes the curious absence of such phrasing.

According to your eternal nature, you will now deny and offuscate.

You know what you meant.

You will deny, but you know.

Wed, 07/18/2012 - 06:35 | 2627350 DutchR
DutchR's picture

Watch the monologue: http://www.youtube.com/watch?v=16K6m3Ua2nw

 

Oops, to slow.

Tue, 07/17/2012 - 22:21 | 2626733 Mentaliusanything
Mentaliusanything's picture

Apology but I don't have an economics degree from Stanford. However is the debt of the state held by the people who belong to the state and also the debts of the nation fall upon the people of the nation and as long as your a TBTF those also fall on the people.

I appears to me that all debts and repayments fall upon the Muppets and I never even got a card and flowers from those who gave me the STD (State Transfered Debt).

I want my Government sponsored Freebie to placate me cause I'm sick of racking up debts I have not approved in my Name.

Wed, 07/18/2012 - 00:55 | 2627069 John Sixpack
John Sixpack's picture

Join the club.

Wed, 07/18/2012 - 04:05 | 2627238 tenpanhandle
tenpanhandle's picture

Free food, lodging & education courtesy of FEMA.

Tue, 07/17/2012 - 22:29 | 2626748 boogerbently
boogerbently's picture

Mental,

You approved them, by empowering the "elected officials" that transferred them to you.

(You don't think they'd make the people that got them elected, pay, do you?)

VOTE THEM ALL OUT.

Don't leave even one incumbent.

Thu, 08/16/2012 - 22:02 | 2712985 fiatmasochist
fiatmasochist's picture

Easier said than done:  see   

     Http://lewrockwell.com/orig13/glenn.j1.1.1.html

Tue, 07/17/2012 - 22:45 | 2626778 kito
kito's picture

I heard that after our bond market goes bidless, the Treasury is going to transfer its balance to a capital one card with no interest for one year......plus frequent flyer points so our leaders can get out of dodge in a hurry.......Whats in your wallet???????

Tue, 07/17/2012 - 22:47 | 2626780 q99x2
q99x2's picture

It doesn't matter. It ain't going anywhere and it isn't worth anything. Why worry about it. If anyone has money that anyone else is holding consider it gone. As for what remains that's nothing too. The only ones that make a big deal about it are crooks. To hell with them.

I was talking with a fat lady that has been eating rocks for 20 years. She's not worried in the least. "To hell with them," she says.

Tue, 07/17/2012 - 22:55 | 2626791 kito
kito's picture

how are the fat ladys teeth??? and please let me know when she starts to sing.......

Tue, 07/17/2012 - 23:32 | 2626822 Atomizer
Atomizer's picture

Who owns the other side of the debt?

Well, we have that all figured out of you. See, while we scramble your brains with consumer advertisement. Those caught working against the system committing the same acts the democratically elected taxpayer officials becomes a Catch 22. 

So we create a [.INT body] to track down unelected peeps to collect on lost revenues generated by the very some government people who break the same laws.  

ta-da..

http://www.interpol.int/ 

Just wait for the same old SEC stories to surface.. E:\users\Myvideo\child porn\interpol.int on employee HD’s too erupt. 

Meanwhile, rapid cleanup to refocus on the important subjects.

http://www.interpol.int/Wanted-Persons

 

Cannot seem to find Jon Corzine on your Interpol list of wanted people. How is this possible?

Edit: I just gave you the opportunity to get your shit together or you face defunding. 

Baton 

Tue, 07/17/2012 - 23:42 | 2626897 Schmuck Raker
Schmuck Raker's picture

From the BIS report's conclusion:

A clear implication of these results is that the debt problems facing advanced economies are
even worse than we thought. Given the benefits that governments have promised to their
populations, ageing will sharply raise public debt to much higher levels in the next few
decades. At the same time, ageing may reduce future growth and may also raise interest
rates, further undermining debt sustainability. So, as public debt rises and populations age,
growth will fall. As growth falls, debt rises even more, reinforcing the downward impact on an
already low growth rate....

...Oopsie.

Wed, 07/18/2012 - 00:07 | 2626975 Bunga Bunga
Bunga Bunga's picture

But, but, but nobody could see this coming.

Wed, 07/18/2012 - 00:06 | 2626973 Hal n back
Hal n back's picture

social security trust holds a few trillion of the debt.

 

seems like social security, and public and private pensions are significantyy underfunded. Oh Boy.

Wed, 07/18/2012 - 00:08 | 2626981 monopoly
monopoly's picture

And they never never talk about it on MSM. It is like the debty does not exist, is not a big deal and will take care of itself. The crap that is on the evening news is such a waste of time. Hardly ever watch that idiot box anymore. 

They will talk about it, that I promise....when it is too late.

Wed, 07/18/2012 - 00:28 | 2627011 Atomizer
Atomizer's picture

Nope, they never talk about the Bank of International Settlements. As far as JP6 knows, it’s a new program called Barack’s Investment Stimulus.

 

Wed, 07/18/2012 - 01:38 | 2627109 Arnold Ziffel
Arnold Ziffel's picture
America Heading Towards a Collapse Worse Than 2008 AND Europe! Says Peter Schiff

 

So what should investors do to protect themselves? Schiff has three suggestions:

1. Get Out of Treasuries

2. Own the Right Stocks

3. Buy Silver and Gold

 

http://finance.yahoo.com/blogs/breakout/america-heading-towards-collapse...

 

His book, The Real Crash: America's Coming Bankruptcy, recommends also buying oil and oil drillers if I remember correctly.

Wed, 07/18/2012 - 02:09 | 2627137 chump666
chump666's picture

BRICS are starting to fall into hyperinflation, starting with India

June consumer price inflation slows slightly to 10.02% y/y from 10.36%
But food inflation higher at 10.71%, up from 10.66% in May
Data on Monday showed WPI at 7.25% in June (7.55% previously)
RBI Governor warned this week that inflation "way above" comfort levels
RBI threshold level for inflation is near 5.0%

Main reason Bernanke was vague with QE3. 

Wed, 07/18/2012 - 02:24 | 2627150 Sandmann
Sandmann's picture

I think your Sovereign Debt figures are underestimated at least in the case of the UK - excluded are Off-Sheet Liabilities and Loans - PFI and other Unfunded Liabilities. Corporate Liabilities have Pension Liabilities to carry but Sovereigns do not - yet those Liabilities are potential tax increases on the Household Sector.  Household Debt is significantly higher in the UK when Interest is capitalised as it should be since retail interest on Debt exceeds GDP growth by factors of 20-40 times. The REAl transfer of resources through Interest require liquidation of Household Assets or Accumulation of Accrued Interest as Capital Owed.

The statics of this model do not reveal the impact of REAL transfers of REAL resources from productive use simply to serve Accounting not Economic Identities

 

Wed, 07/18/2012 - 02:35 | 2627163 hooligan2009
hooligan2009's picture

quite right...be interesting to see what unfunded medicare/medicaid numbers are, plus all government guarantees. all you get is an actuarial valuation that has worse predeictive power than OMB/CBO/Fed economic numbers.

Wed, 07/18/2012 - 02:29 | 2627154 canary
canary's picture

Australia's household debt to GDP is ~105%;  right at the high end of the scale.  Not mentioned here.  ??????  Then again corporate and govt much lower than others, so still plenty of room for the govt to take over households debt when it all goes pear shaped and shift it to the people. 

Wed, 07/18/2012 - 02:33 | 2627160 hooligan2009
hooligan2009's picture

another hmmm...seems to be all about people and corporates and who lends the money to perpetuate the game...

government debt and private sector debt are the same thing, just labelled differently. they both represent individuals living beyond their means, just one is a collective decision and the other is a private decision.

corporate debt could be any amount of gdp if it can be funded from free cash flow and not just round tripped in perpetuity.

rather begs the question who is lending the money. seems like every country is living beyond its means and people will all vote never to repay debt. cant blame governments since we are blaming ourselves, we voted for people to borrow on our behalf.

so who lends the money? well banks obviously, by printing money in the form of loans..with a rigged interest rate and a printer outof thin air supply of money from central banks.

who funds the central banks..well no-one at all that i can see. their mandate is not about controlling inflation, it is about the printing of money at a rate demanded in the first instance, then at a rate it thinks is appropriate. of course it has no benchmark. it will claim unemployment, but it can't employ people or start business that have free cash flow.

abolish the fed and make the sum of corporate free cash flow across the country the key metric for money supply and restate the debt ratios accordingly. you will then get the "truth" of affordability and scale of ponzi/manipulation by.....ourselves.

Wed, 07/18/2012 - 02:43 | 2627172 Temporalist
Temporalist's picture
Facebook Falls as Use on Social Site Drops: San Francisco Mover

http://www.bloomberg.com/news/2012-07-17/facebook-falls-on-report-of-use...

 

Wed, 07/18/2012 - 03:14 | 2627197 chump666
chump666's picture

Eventually everyone will get bored with 'social media.'  

Thu, 08/16/2012 - 22:09 | 2713012 fiatmasochist
fiatmasochist's picture

...except tweenagers and grandmaws....that's what I see....

Wed, 07/18/2012 - 05:41 | 2627317 I am Jobe
I am Jobe's picture

Dumbness  breeding more dumbness one must say in the USSA.

 

Looking for Pain Relief? App Tells You Which Aisle in Walgreens

http://go.bloomberg.com/tech-blog/2012-07-16-looking-for-pain-relief-app...

Wed, 07/18/2012 - 03:02 | 2627190 icanhasbailout
icanhasbailout's picture

The real sustainable threshold for government debt is 0%.

 

No higher figure is acceptable because it always leads to a condition where a government cannot continue to add debt and is thus ends up at the same position, where it can't increase its borrowing yet its cash flow is impaired by existing debt service.

 

To object to this one must presume that a certain amount of government debt never gets paid down, in which case the debt is fraudulent from the get-go.

Wed, 07/18/2012 - 03:35 | 2627216 chump666
chump666's picture

ZH, anything on rumors that the  7-day and 84-day USD liquidity auctions (ECB) today?

As most traders and market followers believe that the QE3 is actually going to be massive increase to USD swaps to Europe/ECB thus funding illiquid European banks.

The NY Fed has been funding directly into ECB/Euro bank balance sheets.

Wed, 07/18/2012 - 04:05 | 2627237 AnAnonymous
AnAnonymous's picture

Not being into debt is a way surer poison in US citizen economics.

Because it means that one has not used such a critical tool as debt to up consumption in an abundant world which is showing signs of no longer be abundant.

Not only that but the magnitude of debt matters a lot.

The scaling debt(often government debt)/GDP which provides a pc which hides a vital piece of information in a finite world: the magnitude of the already performed consumption.

All pcers are not equal: many can have 200 pc ratio debt which does not mean they have consumed and benefited from consuming a finite world as much as Japan has.

More US citizen propaganda.

In US citizen economics, debt is certainly not the most violent poison, the absence of debt, a manageable debt, a low consumption level are certainly more lethal poisons.

Wed, 07/18/2012 - 12:06 | 2628391 akak
akak's picture

Psoriasis, styrofoam and champagne:  Minoan salad of the lepers.

Wed, 07/18/2012 - 04:13 | 2627242 backwardation
backwardation's picture

This story forgets that netherlands has almsot highest pension savings and total savings per person in the world.

this plus value of the houses (even with another 20 pct drop) offsets the mortgage obligations by far!

Wed, 07/18/2012 - 04:19 | 2627251 bentaxle
bentaxle's picture

".....it is simply impossible to quantify just what the real level of such debt in the developed world truly is, especially when one accounts for shadow liabilities, rehypothecated collateral, derivatives, and all those other footnotes in financial statements that only become relevant when daisy-chained collateral links start collapsing......."

 

If the "professionals" don't even know what or how much this debt amounts to, no doubt professionals will argue forever about what counts as "real debt" how can Joe Public have the slightest idea??? 

 

And if Joe Public doesn't have a clue then, as far as he cares, if he doesn't know there is this debt, then in his mind it doesn't even count! And so long as he thinks the debt is someone else's responsibility, (thinking he never borrowed it,) he ain't gonna worry about it.

 

I doubt he will make the connection between needing to print, re-hypothecate etc,  just to pay the interest and that it is this that will crush the purchasing power of his $ and his lifestyle. Not only that but 45m+ US citizens on a foodstamp "lifestyle" suggests they are fairly content with that lifestyle.

Wed, 07/18/2012 - 05:33 | 2627287 buzzsaw99
buzzsaw99's picture

Comparing countries that issue their own currency with those that don't on the same chart is a bit misleading. Japan, the USA, can drive rates to zero via the printing press. Greece sees much higher rates and can do nothing about it (without a lot of outside help) making default infinitely more likely. Some would argue that printing is a form of default but imo countries that control their own currency should not have to pay interest on said currency making that point moot.

 

As for household debt in the old days it went boom bust in a cyclical pattern but now it is all bust because so many people have no jobs or shitty jobs so they can't increase spending after bk as they once did.

Wed, 07/18/2012 - 05:30 | 2627302 falak pema
falak pema's picture

Coming back to the greatest potential debt crisis in a borderless world : the private banking/shadow banking crisis. 

We see its ravages in Eurozone where these banks are hanging in by a thread all in denial about their books marked to model; not to market. Thus a very susceptible ongoing spiral exists to spread contagion, if even the smallest domino falls, as their sovereigns cannot bail them all out; ECB print machine or no print machine. The estimated downside for Eurobanking including off balance sheet shadow banking derivative soup is around 30 T for all of Europe. Thats four times GDP.

For all of USA, including is big four major banks, the shadow banking downside is estimated as double that if the Euro contagion hits US continent. Ripple effect in anglo world awesome. This figure is admittedly hotly debated as its the NEXUS of global system. And the FED feels as reserve it has the bullets to ride out ANY financial shit storm from anywhere outside US system. That is where we are today. Can they?....

With China now deleveraging we are hearing about the RE debacle bringing down its leveraged shadow banking system estimated at slightly over 2 T USD.

That gives us the relative size of downside in the shadow banking worlds on three continents. And you can add Japan to that as icing on the fake virtual Asian cum first world cake! 

Its beyond comprehension in real economic terms as its all "funny money". But it could bring the real economy down for a decade and send us all to Armageddon.

Everything You Need To Know About China's Delicate Shadow Banking System - Business Insider 

In the meantime TPTB hurtle along in print/zirp/twist mode with only one thing in mind : get their cronies elected in November! 

Wed, 07/18/2012 - 05:30 | 2627311 I am Jobe
I am Jobe's picture

What USSA needs is more MBA's . Bullish and dumb. Is there an APP for this shit?

Wed, 07/18/2012 - 05:59 | 2627327 HungrySeagull
HungrySeagull's picture

Yes there is a app.

It's called..... (Drumroll please)

"Power Off"

Technology dug us all a hole, one we can never get out of.

Wed, 07/18/2012 - 06:21 | 2627342 falak pema
falak pema's picture

not just technology; its always human nature; hubris and hunger for power/money that digs the hole. Technology is a means not the end. The end is always human Will for power  and tyranny or conversely, when its virtuous, for liberty and justice. 

Those who think technology runs society forget that for technology to thrive there has to be a societal game plan. When it crossing the Rubicon of Power, the game plan becomes evident and those who invent the technology get sucked into the power equation. Time and time again. 

Even the Internet, new horizon, seemingly free today will be up for grabs, as we will hear them say : Just like you cannot let the generals run the war, you cannot let the techies run the Net. We have to now create ORDER...nice word, it chimes with LAW; but whose law and order?

Liberty and freedom require it be the people's not that of the Oligarchs. Who will bell the cat?

Wed, 07/18/2012 - 06:35 | 2627351 AnAnonymous
AnAnonymous's picture

its always human nature; hubris and hunger for power/money that digs the hole.

__________________________

Ah, yes, the ultimate US citizeen kick the can enabler: human nature.

US citizenism is human nature. There is no difference between the two.

US citizenism is the natural organization to human beings.

And for human beings who do not fit the mould, US citizens have this piece of good news for you: it simply means you are not a human being.

US citizen nature is eternal.

Wed, 07/18/2012 - 06:53 | 2627373 TheFourthStooge-ing
TheFourthStooge-ing's picture

AnAnonymous spouted this gibberish:

And for human beings who do not fit the mould, US citizens have this piece of good news for you: it simply means you are not a human being.

Of course, of course. In Chinese citizenism it is much better, because those who do not fit the mold are "half-man, half-thing". In Chinese citizenism, the subjugated retain half-human status, making for them much happiness.

http://en.wikipedia.org/wiki/Slavery_in_China

Wed, 07/18/2012 - 11:54 | 2628342 akak
akak's picture

It is even better in Easter Island Citizenism, because slaves can be imported from far-away Tibet and the future USA (not yet existing in this scenario) by magical time-traveling flying rickshaw of Ben Franklin inventionation, allowing tall stone statues to squat on sides of roads instead of defecating doglike Chinese Citizenism citizens.

Wed, 07/18/2012 - 12:52 | 2628707 TheFourthStooge-ing
TheFourthStooge-ing's picture

Miracularity of inventionation Ben Franklinism doing never to amazement ceasing.

Wed, 07/18/2012 - 12:58 | 2628737 akak
akak's picture

The concurrents of your argumentationalizings are very much something, the juiciest bits of it.

Wed, 07/18/2012 - 06:59 | 2627380 Mamzer Ben Zonah
Mamzer Ben Zonah's picture

If Americans don't want McDonalds' jobs, the jobs can be automated or offshored to a surprising extent.

For example, when you drive thru and place an order, the person you are talk with could be hundreds or thousands of miles away, and soon might be a speech recognition machine.

Wed, 07/18/2012 - 07:04 | 2627387 Heroic Couplet
Heroic Couplet's picture

Repealing the Bush tax cuts reduces a third of the deficit and reduces some Cayman Island accounts. Next.

Wed, 07/18/2012 - 10:20 | 2627891 gregga777
gregga777's picture

The US debt situation is much worse than publicly ackowledged via the "Debt" ceiling.

According to Mr. Gross of PIMCO, from a newsletter in April 2011 (this is a dead link now but the link was http://www.pimco.com/Pages/Skunked.aspx ), the "Discounted Net Present Value of Current [US Government] Spending" on "US Unfunded Entitlement Program Liabilities [using] Treasury's and Health and Human Services own data" for the following Federal programs [Ponzi Schemes] are:

Social Security (and becoming much worse due to the Fed's ZIRP):  $7.1 Trillion
Medicare:  $22.8 Trillion
Medicaid:   $35.3
National Debt:  $9.1 Trillion

Total Undisclosed off-balance sheet US Treasury debt:  $65.2 Trillion or about 410% of projected US 2012 GDP.

Can anyone spell "Holy exploding debt-bomb, Batman!"?

I saved his newsletter.  I don't know if I'm allowed to quote his newletter in its entirety.  But, he wrote (the graphics will not post into this window so I include the numbers from the graphics):

"That adorable skunk, Pepé Le Pew, is one of my wife Sue’s favourite cartoon characters. There’s something affable, even romantic about him as he seeks to woo his female companions with a French accent and promises of a skunk bungalow and bedrooms full of little Pepés in future years. It’s easy to love a skunk – but only on the silver screen, and if in real life – at a considerable distance. I think of Congress that way. Every two or six years, they dress up in full makeup, pretending to be the change, vowing to correct what hasn’t been corrected, promising discipline as opposed to profligate overspending and undertaxation, and striving to balance the budget when all others have failed. Oooh Pepé – Mon Chéri! But don’t believe them – hold your nose instead! Oh, I kid the Congress. Perhaps they don’t have black and white stripes with bushy tails. Perhaps there’s just a stink bomb that the Congressional sergeant-at-arms sets off every time they convene and the gavel falls to signify the beginning of the “people’s business”. Perhaps. But, in all cases, citizens of America – hold your noses. You ain’t smelled nothin’ yet.

 

I speak, of course, to the budget deficit and Washington’s inability to recognise the intractable: 75% of the budget is non-discretionary and entitlement based. Without attacking entitlements – Medicare, Medicaid and Social Security – we are smelling $1 trillion deficits as far as the nose can sniff. Once dominated by defence spending, these three categories now account for 44% of total Federal spending and are steadily rising. As Chart 1 points out, after defence and interest payments on the national debt are excluded, remaining discretionary expenses for education, infrastructure, agriculture and housing constitute at most 25% of the 2011 fiscal year federal spending budget of $4 trillion. You could eliminate it all and still wind up with a deficit of nearly $700 billion! So come on you stinkers; enough of the Pepé Le Pew romance and promises. Entitlement spending is where the money is and you need to reform it.

[(Textual reproduction of chart 1)

Lack of Discretion

Federal Spending by Category Share of Total Expenses

2011           40-Year Average

Entitlement Spending 44%           42%
Defence [sic] 24%           24%
Non-Defence [sic] Discretionary 25%           23%
Net Interest Payments   7%           11%

Total Federal Expenses 100%           100%

            Normal

 Source: White House Office of Management and Budget, USA, Inc.

Chart 1

]

Even then, the situation is almost beyond repair. Check out the Treasury’s and Health and Human Services’ own data for the net present value of entitlement liabilities shown in Chart 2.

[(Textual reproduction of chart 2)

 

Pee-U

USA Balance Sheet Liabilities

Federal Debt $9.1 T

Unfunded Social Security $7.9 T

Unfunded Medicare  $22.8 T

Medicare  $35.3 T

Source: A Basic Summary of America's Financial Statements, USA, Inc.  Mary Meeker

Chart 2

]

 

The above four multi-trillion-dollar liability balls are staggering in their implications. Remember first of all that the nearly $65 trillion of entitlement liabilities shown above are not some estimate of future spending. They are the discounted net present value of current spending should it continue at the projected demographic rate (importantly ­– it is much higher than the annual CPI + 1% used as a discounter because demand for healthcare rises much faster than inflation.) And while some Honourable Congressional Le Pews would counter that Medicaid is appropriated annually and therefore requires no discounted reserve, those words would surely count as “sweet nothings”, believable only to those whom they romance every several years at the polls. The incredible reality is that the $9.1 trillion federal debt that constitutes the next-to-tiniest ball in our chart is nothing compared to unfunded Medicaid and Medicare. It is like comparing Pluto to Saturn and Jupiter. The former (the $9.1 trillion current Treasury debt) does not even merit planetary status in our solar system of discounted future liabilities. It’s really just a large asteroid.

Look at it another way and our dire situation becomes equally revealing. Suppose that the $65 trillion of entitlement liabilities were fully funded in a “lockbox”, much like Social Security is falsely imagined to be. Just suppose. And say the cost of that funding (Treasury debt) was the same CPI + 1% that was used to produce the above discounted present value in the first place. Actually, that’s not a bad guesstimate for the average yield of all Treasury debt. If so, then the interest expense on the $75 trillion total debt would equal $2.6 trillion, quite close to the current level of entitlement spending for Social Security, Medicare and Medicaid. What do we pay now in interest? About $250 billion. Our annual “lockbox” tab would rise by $2.35 trillion and our deficit would be close to 15% of GDP! The simple conclusion would be this: Unless you want to drastically reduce entitlement spending or heaven forbid raise taxes, then Pepé, you’ve got a stinker of a problem.

Previous Congresses (and Administrations) have relied on the assumption that we can grow our way out of this onerous debt burden. Perhaps we could, if it was only $9.1 trillion, as shown in Chart 2. That would be 65% of GDP and well within reasonable ranges for sovereign debt burdens. But that is not the reality. As others, such as Pete Peterson of the Blackstone Group and Mary Meeker, have shown much better and for far longer than I, the true but unrecorded debt of the US Treasury is not $9.1 trillion or even $11-12 trillion when Agency and Student Loan liabilities are thrown in, but $65 trillion more! This country appears to have an off-balance-sheet, unrecorded debt burden of close to 500% of GDP! We are out-Greeking the Greeks, dear reader.

If so, and if the USA were a corporation, then it would probably have a negative net worth of $35-40 trillion once our “assets” were properly accounted for, as pointed out by Mary Meeker and endorsed by luminaries such as Paul Volcker and Michael Bloomberg in a recent piece titled “USA Inc”. However approximate and subjective that number is, no lender would lend to such a corporation. Because if that company had a printing press much like the US with an official “reserve currency” seal of approval affixed to every dollar bill, that lender/saver would have to know that the only way out of the dilemma, absent very large entitlement cuts, is to default in one (or a combination) of four ways: 1) outright via contractual abrogation – surely unthinkable, 2) surreptitiously via accelerating and unexpectedly higher inflation – likely but not significant in its impact, 3) deceptively via a declining dollar– currently taking place right in front of our noses, and 4) stealthily via policy rates and Treasury yields far below historical levels – paying savers less on their money and hoping they won’t complain.

If I were sitting before Congress – at a safe olfactory distance – and giving testimony on our current debt crisis, I would pithily say something like this:

“I sit before you as a representative of a $1.2 trillion money manager, historically bond oriented, that has been selling Treasuries because they have little value within the context of a $75 trillion total debt burden.

Unless entitlements are substantially reformed, I am confident that this country will default on its debt; not in conventional ways, but by picking the pocket of savers via a combination of less observable, yet historically verifiable policies – inflation, currency devaluation and low to negative real interest rates. Our clients, who represent unions, cities, US and global pension funds, foundations, as well as Main Street citizens, do not want to be shortchanged or have their pockets picked. It is incumbent, therefore, in order to preserve the integrity of the US Treasury market along with its favourable global interest rates, and to promote a stable US economy, that entitlement spending be reduced, and that future liabilities be addressed in terms of healthcare and Social Security cost containment. You must attack entitlements and make ‘debt’ a four-letter word”.

Thank you, and like Pepé Le Pew, why don’t you try changing your stripes or at least pretend you’re a French-speaking cat. The odour in these chambers is all too familiar and a skunk needs all the help it can get."

 

 

 

 

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