As Global Debt Hits A Record $247 Trillion, The IIF Issues A Warning

Every quarter the Institute of International Finance publishes a new number of the total amount of global debt outstanding, and every quarter the result is the same: a new record high

Today was no exception: according to the IIF's latest Global Debt Monitor, the amount of debt held in the world rose by the biggest amount in two years during the first quarter of 2018, when it grew by $8 trillion to hit a new all time high of $247 trillion, up from $238 trillion as of Dec. 31, 2017 and up from by $30 trillion from the end of 2016.

In other words, there is now a quarter quadrillion dollars in global debt, and it represents 318% of global GDP. More concerning is that this was the first time since Q3 2016 that global debt to GDP increased, suggesting that the marginal utility of debt is once again below 1.

This is how the debt is broken down as of Q1 2018 and compared to Q1 2013:

  • Non-financial corporate debt: $74 trillion, up from $58 trillion in 5 years
  • Government debt: $67 trillion, up from $56 trillion
  • Financial debt: $61 trillion, up from $56 trillion
  • Household debt: $47 trillion, up from $40 trillion

And visually:

Some more details from the report, via Bloomberg:

  • The government debt-to-GDP ratio has surged to 101 percent in the U.S.
  • Non-financial corporate debt is now at record highs in Canada, France and Switzerland
  • Household indebtedness in China, Chile and Colombia grew over 3% since Q1 2017, topping 49%, 46% and 30%, respectively.

What was surprising about the report - certainly not the latest all time high debt numbers, those are now standard - is that the IIF voiced a strongly negative opinion of recent developments in the debt arena.

"The pace is indeed a cause for concern," warned IIF’s Managing Director Hung Tran during a call with reporters. "The problem with the pace and speed is if you borrow or if you lend very quickly, the quality of the credit tends to suffer." It also means more governments, businesses and individuals have been borrowing that could have trouble paying the money back, or merely paying interest on it as rates rise.

"The quality of creditworthiness has declined sharply," Tran added ominously, echoing what Moody's said at the end of May.

The IIF did not stop there and cautioned that with global growth losing steam and becoming increasingly divergent, and with U.S. rates rising, worries about credit risk are starting to creep back to the forefront, including in many developed economies, such as the United States and Western Europe.

The IIF also said that while the amount of debt outstanding is not necessarily a concern because it can be rolled over and refinanced - provided there is no sharp economic slowdown - they stressed that developments in the US were especially worrisome for the global growth picture, as in addition to increasing debt at a faster pace the country is also raising interest rates, causing the cost of borrowing to rise and potentially leading to a surge in defaults.

Underscoring the growing debt threat, IIF’s senior director Sonja Gibbs said that there was an increased risk of sovereign debt crises in a select few developed markets as a result of the increase of debt and financing costs:

"Government debt is higher than it was prior to the crisis and corporate debt as well. This may be slightly overlooked."

Speaking to Yahoo Finance, Gibbs added that the United States’ debt growth was particularly worrisome, where it was now more than 100% of GDP. She explained that with the surge in deficit spending under President Trump fiscal stimulus, the U.S. will now have funding needs of 25% of its GDP.

"The U.S. really stands out here because … a lot of that is the expanding budget deficit as well as maturing debt,” Gibbs said. "That’s a lot of financing need affecting the market."

For now that need has been largely ignored by the market however, and in fact, according to Harley Bassman, the lack of an increase in longer yields is a "signal that an iceberg is dead head" as it suggest the Fed is losing control of interest rates amid a broad flattening of the yield curve.

Finally, if developed markets don't get you, then emerging markets just may: the IIF also raised concern that total emerging market debt (ex-financials) rose by $2.5 trillion to a new record of $58.5 trillion in Q1. As Bloomberg reports, on Monday, the World Bank's CEO Kristalina Georgieva said that "with interest rates going up, attention on debt sustainability has to be stronger."

Narrowing down the EM risk, the IIF said that government debt has seen the biggest increase in Brazil, Saudi Arabia, Nigeria and Argentina, with dollar refinancing risk particularly high for Argentina and Nigeria, where over three-quarters of redemptions will be in dollars. About $900 billion is in U.S. dollar-dominated emerging bonds/syndicated loans that will mature by 2020. And the higher the dollar rises, the more likely it is that one or more of these countries will be forced to default on its debt.

Comments

are we there yet . . . _ _ _ . . . Tue, 07/10/2018 - 20:42 Permalink

That is just the debt that is known. The shadow banking debt and true unfunded obligations makes the debt even bigger. That level of debt can not survive when inflation returns, or its cousin stagflation. One way or another accounting balances always eventually balance. In this case I am impressed that the Ponzi economy has gone on for over a decade, but all Ponzi schemes fail, and usually with a crash.

In reply to by . . . _ _ _ . . .

UnschooledAust… Tue, 07/10/2018 - 18:53 Permalink

"More concerning is that this was the first time since Q3 2016 that global debt to GDP increased..."

Yeah, sure. Global debt increases plusminus 10% a year, with GDP-growth rates way below. But yeah sure, only happens once in a while that debt/GDP increases.

silverer Antifaschistische Tue, 07/10/2018 - 19:25 Permalink

Zeroes look right to me. Besides, we have a way to go. They've already been planning on it for a long time.
Billion
Trillion
Quadrillion
Quintillion
Sextillion
Septillion
Octillion
Nonillion
Decillion
Undecillion
Duodecillion
Tredecillion
Quattuordecillion
Quindecillion
Sexdecillion
Septendecillion
Octodecillion
Novemdecillion
Vigintillion
Unvigintillion
Duovigintillion
Trevigintillion
Quattuorvigintillion
Quinvegintillion

...and so forth. Give it few months...

In reply to by Antifaschistische

U. Sinclair Tue, 07/10/2018 - 19:13 Permalink

Problem with this worldwide Central Banking experiment is that it can go haywire any day.
It has no trackrecord, no foundation and because they got a way with it for a lot longer anybody would have thought possible it makes them over self confident.
But that Minsky Moment is lurking around every corner and the blocks are getting smaller and smaller.....

Paul Morphy Tue, 07/10/2018 - 19:32 Permalink

GDP/Debt ratio is redundant. We know that the GDP figures are manipulated upwards.

 

Debt in nominal terms continues to increase. That is unsustainable.

youngman Tue, 07/10/2018 - 20:15 Permalink

and back to that article on Gold.....it stays down as they print to infinity...there will come a day when it all falls apart and gold goes to the moon

conraddobler Tue, 07/10/2018 - 20:54 Permalink

Oh it'll be paid back that's not the question, the question is how much the money that pays it back will be worth?

It always startles me that people can see all the inequality graphs rocket up and to the right to infinity and beyond and not understand that THE HEIST HAS ALREADY BEEN COMMITTED.

All we're arguing over now is what level of complete serfdom 99 percent of humanity has to endure as a result of said heist.

My money is it'll go on until the rest of the loot is swept up in a tidy fashion over the next decade or two and then we'll all move on to a plan of debt forgiveness my money is on, "99 percent of humanity now swims with the fishes ."

They took everything and installed a nearly endless moat of useless wonks and bureaucrats between us and the them and they're paying them with fake money they're putting on our tab.

You have to love the pure cuckhellish nature of this situation.

khakuda Tue, 07/10/2018 - 21:34 Permalink

So the natural question is does it end in a deflationary debt collapse or do central banks print money, buy up the bad debt, hold it on their balance sheets forever and pretend that their was no inflation from all the money printing in either asset prices or consumer prices.

Uh...never mind.

Blankfuck Tue, 07/10/2018 - 21:40 Permalink

FED FUCKTARDS AND CENTRAL BANKSTERS UNITED! "IN GOD THEY TRUST" LIKE THE FUNNY MONEY PRINTED SAYS SO!   TAKING THOSE PRINTING MACHINES, THEN  STUFFING BILLIONS INTO POCKETS OF BANKSTERS AND OTHER FRIENDS! DEBT ON YOU LITTLE PEOPLE FROM THE FRAUD AND COLLUSION BY THEM!  

TIME FOR UNREST AND TAKE THESE CORRUPT FUCKTARDS OUT  OF THE SYSTEM.  TAKE AWAY THE PONZI THEY PRINTED, HOMES YACHTS, ETC AND PAY BACK THE DEBT WHICH THEY PLACED ON YOU!

THIS IS NO LONGER A FREE COUNTRY BUT DEBT BURDEN ON YOU SO THEY CAN LIVE WELL!

ITS A CORRUPTED SYSTEM MORE THAN EVER!

ChefHedge Tue, 07/10/2018 - 22:03 Permalink

Understanding the “debt” game. The scheme is to get the sheeple to believe that there is a debt burden on them so they continue with the game to get fleeced while the game is in play. Common sense tells anyone with half a brain cell that the debt can never be paid back. It doesn’t matter how many Trillions there are in play as long as the ignorant continue to play and loose the very things that have value to the system and those controlling the numbers. At some point, an Aahaa moment will happen in the games confidence when the fleecing of the big fish gets painful (now) and a system reset will start to happen. A new game with new rules and numbers (currency/crypto’s) will manifest and the fleecing will restart all over again as greed builds and people are drawn in from the carnage to a better option (read ponzi) until the end of its life cycle. 

For the “Mob”, it’s all about the “skim”. 

IDESofMARCH Tue, 07/10/2018 - 22:06 Permalink

Grab all you can and runn as fast as you can.

Got another card in the mail and I'm gonna buy all I can,  They can print more money faster then they can make more stuff.

Let it Go Tue, 07/10/2018 - 23:04 Permalink

Among all the recent news about euphoria and a market "melt-up" several reasons exist to be cautious. During the last two and a half years central banks and countries around the world have added more fuel to the fire which has postponed the day of reckoning. This has made all of us thinking the market was about to turn south looking rather silly and underscores the fact that trying to time economic events is both confusing and complex. Still, the fact the numbers do not work means reality will be visiting us soon. The reasoning is outlined below.

http://Economic Reality Will Soon Be Knocking On The Gate.html

haruspicio Wed, 07/11/2018 - 06:35 Permalink

I predict that the US will start reneging on its debts. Sanctions are one way it welshes on debt. Expect Trump the arch-bankrupt to think up some more soon. For the life of me I can't figure out why China and Japan finance the US debt, in reality they are paying for all these wars.