The world is a strange place. The banks have no money. Or rather, they have no money that they want to lend anyone out there in the real world. So, in their place, it’s the governments that have decided since the financial crash to become the lenders to the economies. Except they are principally lending to those that don’t want to lend to the people: the banks! Governments have stopped governing and started financing. Except, they are as good at financing the economy as they are at governing it might seem. They have created nothing but more debt that we as people shall eventually have to pay back to the banks. Isn’t this complicated enough to make you dizzy?
According to figures released by the Bank of International Settlements (NIS) there has been a growing decline in cross-border lending since the financial crisis. The figures were released on Sunday 9th March and if we are to believe them, then they state that global debt issuance has increased from $70 trillion in 2007 to $100 trillion today. Governments are the largest contributors.
Public debt securities reached $43 trillion (in June 2013), which means that it’s an 80%-increase on the figure for 2007. Today money is being borrowed less from banks but rather though debt markets. But, has there been any choice? The financial sector and the banking sector have largely cut their lending. Governments have become the new banks by trying to get their economies moving by lending or printing their own money, largely without much success except boosting the financial markets and the banks themselves.
The global debt market will only have one direction to go in and that is up. It can only grow while the economy is doing the opposite. The day inflation kicks in we shall have greater problems than they actually bargained for. Why don’t people think ahead these days?
At the same time and only a few days ago the Federal Reserve issued a statement saying that net worth of the US had increased beyond all expectations, jumping to a new high at the end of 2013. Apparently, if we are to believe what comes out of the Federal Reserve these days, then we have a net worth that has increased due rises in real estate prices and our bank accounts swelling. Yet, at the same time debt issuance has increased.
Perhaps the Federal Reserve should look again at the majority of people’s bank accounts and really check if that figures that are being released do correspond to the reality of the majority of people in the USA. According to the Federal Reserve the net worth of Americans has risen by a staggering all-time high of $2.95 trillion; now standing at $80.66 trillion at the end of the fourth quarter of 2013.
Household net worth apparently increased in the USA by 14% over the entire period of 2013. Of course shares were the major reason for that increase since they increased by $5.6 trillion in the year. Real estate increased by $2.3 trillion.
Naturally, if we look at it that way, then we are certainly seeing a staggering increase. Aren’t they worried at all at the Federal Reserve that this doesn’t actually mean very much? Aren’t they worried that this net-worth increase is just virtual and nothing but false money that is not lasting in time? Aren’t they…? Why even bother asking the questions, since the Federal Reserve seems pretty happy that net worth has increased, whether that is a real increase or not is immaterial for the guys and the girls on 20th and Constitution Avenue.
We are supposedly meant to rejoice that the money that Ben Bernanke threw out of his helicopter as he flew off to warmer climes (although, one might have thought that the Federal Reserve was hot enough with the printing presses running twenty-four seven) has inflated the stock market and made us all net-worth gainers (on paper at least). Obviously, statistics are there to do exactly that: tell us all that we are richer and better off than ever before. It beats me why we continue moaning about the state of the economy.
You may as well stop spending altogether since we apparently live in an economy where everything is just hunky-dory (they must be wearing rose-colored specs over there at the Fed). The Federal Reserve is so convinced that despite the poor employment figures that were released last Friday in the US (analysts thought that there would be a rise of 200, 000 new jobs in the country, but there were only 175, 000) they will continue tapering it’s $85 billion asset-purchasing by $10 billion per month. Official unemployment figures stand at6.7%.
We don’t need to mention real unemployment figures; or do we?
Originally posted: Global-Debt Market: $100Trillion