Global Debt Hits Record $233 Trillion, Up $16Tn In 9 Months

Last June we reported  that according to the Institute of International Finance - perhaps best known for its periodic and concerning reports summarizing global leverage statistics - as of the end of 2016, in a period of so-called "coordinated growth", global debt hit a new all time high of $217 trillion, over 327% of global GDP, and up $50 trillion over the past decade.

Six months later, on January 4, 2018, the IIF has released its latest global debt analysis, which reported that global debt rose to a record $233 trillion at the end of Q3 of 2017 between $63Tn in government, $58Tn in financial, $68TN in non-financial and $44Tn in household sectors, an total increase of $16 trillion increase in just 9 months.

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According to the IIF, private non-financial sector debt hit all-time highs in Canada, France, Hong Kong, South Korea, Switzerland and Turkey.

And yet, largely as a result of the ongoing Chinese crackdown on shadow banking, even as global debt rose to new record highs, the ratio of debt-to-GDP fell for the fourth consecutive quarter as economic growth accelerated. The ratio is now around 318%, nearly 10% below the high set in the first quarter of 2017.

In the annual report, the IIF notes that "a combination of factors including synchronized above-potential global growth, rising inflation (China, Turkey), and efforts to prevent a destabilizing build-up of debt (China, Canada) have all contributed to the decline."

Still, while global GDP has enjoyed a period of accelerating growth, this may soon come to an end even as debt levels continue to rise. Meanwhile, the debt pile could act as a brake on central banks trying to raise interest rates, given worries about the debt servicing capacity of highly indebted firms and government, the IIF analysts wrote.

And speaking of rates in 2018, the IIF pointed out that after several years of forecasters reducing their year-end rate predictions, 2018 is the first year in many when "for a change" forecasters are predicting a rebound in interest rates.  Maybe this is the one year when "experts" will finally be right when it comes to interest rates.

 

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Comments

Dilluminati SWRichmond Jan 7, 2018 8:11 PM Permalink

I have been saying for quite some time that between demographic changes within the economy, people getting older and all wanting to retire at the same time; and along with the phenomenon of debt deflation which is an equation that illustrates that per x amount of debt, x amount must be serviced or refinanced, that we now eclipse in global debt nearly annual GNP of the USA.  What people don't realize is that the market is worth only what the next buyer will bid.. and there isn't enough money at appropriate liquidity to support the debt.  There is indeed a problem however if the market remains myopic about the issue the existing market could go much higher.. so really it is a case of taking profits and attempting to find as secure a wealth preservation investment that you can.

https://en.wikipedia.org/wiki/Debt_deflation

If you look at the total amount of debt and then apply appropriate equations you will find that it is always a failure of lender of last resort where things fail.

http://www.debtdeflation.com/blogs/2014/02/02/modeling-financial-instab…

The leverage is now so high, and so prolonged, that sooner or later somebody says "enough" and isn't willing to counter-party and has a short position formulated as musical chairs always ends with somebody coming up short.  The closing window of repo at central banks and an election year make this more probable.. so be careful

I had a person tell me I was a coder today and not a numbers person.. couldn't be further from the truth..  I'm an expert at abstract data..

In reply to by SWRichmond

itstippy Pool Shark Jan 7, 2018 5:01 PM Permalink

And that's why, push come to shove, the "risk" is held by the taxpayers.  

When asset values go pearshaped, as in a depression, the debt remains but the underlying asset no longer covers it.  Both debtor and creditor face insolvency.  At that point governments and central banks step in to "provide liquidity".  The liquidity provided is backed by current and future taxpayers.

In reply to by Pool Shark

francis_the_wo… Pool Shark Jan 7, 2018 5:27 PM Permalink

I get where you are coming from, and I'm certainly not advocating for a debt reset, but not all wealth would go "POOF".  If you own real assets outright, especially ones that produce cashflow, you'll do just fine in a hypothetical reset.

Of course, I'll note that both gold and cryptos might do pretty well in such a scenario.

In reply to by Pool Shark

herkomilchen Milton Keynes Jan 7, 2018 5:08 PM Permalink

The big banks hold the credit and hold the risk of default.  But the risk is asymmetric, because they have a government-privileged position that borrowers do not have.

First, they didn't actually have to pay any savers to obtain the money they lend out. The money is free for them to lend in unlimited quantity because the government lets them create it from thin air. 100% profit margin on interest received will make up for a lot of loan defaults.

Second, they are too big to fail both through backstopping from congressional bailouts and through FDIC insurance.  Both of which tax the population at large to compensate the bankers if they lose too much money from a wave of loan defaults in a debt bubble burst.  Nor will any bankers will lose their jobs, see their careers hampered or reputations tarnished, or otherwise bear any liability or financial responsibility for their actions.

Thus freed from any of the normal checks or balances a free market lender would face, suffering no costs or consequences but only upside to excessive lending, they remain eager and able to keep lending even in the current environment.

In reply to by Milton Keynes

Yen Cross Jan 7, 2018 4:34 PM Permalink

  I did pretty well shorting the euro last week.  Selling the rippppssss.

  The CB's are covering, while fixed [retard] income fills the gaps in equity markets.

   Use your time wisely, and understand what [inverse] trading is.

UnschooledAust… Jan 7, 2018 4:50 PM Permalink

Guess I need some explanation.

"And yet, largely as a result of the ongoing Chinese crackdown on shadow banking, even as global debt rose to new record highs, the ratio of debt-to-GDP fell for the fourth consecutive quarter as economic growth accelerated. The ratio is now around 318%, nearly 10% below the high set in the first quarter of 2017."

The debt increased, the debt-to-GDP decreased, so logically the GDP had to increase too. But how would a crackdown on shadow banking accomplish that? In assuming it was not this crackdown, where did that growth actually come from? Considering that we are talking about debt increase of close to 10% yoy as of the numbers above. Where is all that fucking growth?

I'm confused.

In.Sip.ient Jan 7, 2018 4:53 PM Permalink

Let me see... 

 

US$233 TRILLION in total "debts"

 

We see yesterday that your basic "millionaires"

world wide ( 15million with US$1-5M each ) are

"worth" over US$15+Trillion ...

 

The Wilshire 5000 seems to suggest all US equities

are "worth" around US$33Trillion.

 

And all of US$7.6Trillion in circulation world wide.

 

Could there be a problem here???

 

InnVestuhrr Jan 7, 2018 4:53 PM Permalink

When every regime has central bank money generator PLUS fiat currency PLUS exploding debt, ie reality, then the levels are IRRELEVANT, ie "new normal", just bits in computer databases.

Grow up, get your head out of history's ass, and get over it.

El Hosel Jan 7, 2018 4:58 PM Permalink

Gee Wally,

There in lies (or in their lies) the inflation nobody talks about.... the cost of manufacturing a "global synchronized recovery" has gone parabolic.

Paul Morphy Jan 7, 2018 5:03 PM Permalink

In Ireland today, the death of Peter Sutherland was announced. Sutherland was head bottle washer at the WTO, and had overseen the Uruguay round of talks which ushered in the era of free trade, removal of tariffs, in 1994. This deal was sold on the basis that it would herald a new era of prosperity for humanity.

 

Sutherland was an unapologetic globalist/internationalist.

Global indebtedness is one part of his sordid legacy.