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