The New CS Board

[jumanji0881]

This will not end well ! -

Doug Noland : $247 Trillion and (Rapidly) Counting : http://creditbubblebulletin.blogspot.com/2018/07/weekly-commentary-247-trillion-and.html

Excerpts:
The Institute of International Finance is out with their latest data that, unfortunately, is not made available in detail to the general public. Global debt ended the first quarter at a record $247 Trillion, or 318% of GDP. Even after a decade of historic Credit inflation, global debt continues to expand at ("Terminal Phase") double-digit rates (11.1% y-o-y).

Global debt growth accelerated during the first quarter to $8.0 Trillion - and surged $30 Trillion over just the past five quarters. In a single data point not to be disregarded, Global Debt Has Expanded (a difficult to fathom) $150 Trillion, or 150%, Over the Past Ten Years. Actually, the trajectory of Bubble-period Credit expansion may seem rather familiar. It's been, after all, a replay of the reckless U.S. mortgage Credit episode, only on a much grander global scale.

July 10 - Yahoo Finance (Dion Rabouin): "'The pace is indeed a cause for concern,' IIF's Executive Managing Director Hung Tran told Yahoo… '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.' That means more governments, businesses and individuals have been borrowing that could have trouble paying the money back. 'The quality of creditworthiness has declined sharply,' Tran added… Sonja Gibbs, IIF's senior director of the global capital markets department, noted 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,' Gibbs said… Gibbs added that the United States' debt growth was particularly worrisome, given that it has now grown to more than 100% of GDP. With the increases in spending from President Donald Trump and Congress, 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.'"

U.S. government debt surpassed 100% of GDP during the quarter. Japanese government debt-to-GDP ended the quarter at 224%, the euro area at 101%, the UK at 105% and the emerging markets to 48% of GDP.

The first quarter saw emerging market debt rise by $2.5 trillion, or about 18% annualized, to a record $58.5 TN. EM Non-financial Corporate debt surged $1.5 TN, or about 25% annualized, to $31.5 TN - and now exceeds 94% of GDP. One big final blow-off setting the stage for crisis.

The problem, also noted by the WSJ: "Emerging-market central banks used roughly $57 billion in foreign reserves in June, which would rank as the largest monthly intervention since late 2016…" Brazil is said to have burned through $44 billion to support its faltering currency. EM reserve data will be monitored closely over the coming weeks and months. Dwindling reserves will incite a rush to the exits.

It's also worth reminding readers than China's international reserve holdings have declined about $900 billion from 2014 highs to $3.112 TN. China now faces the dilemma that their maladjusted economic system will require several trillion ($) of annual Credit growth. Yes, Beijing can dictate lending from state-directed financial institutions. But aggressive reflationary measures risk spurring capital flight and currency turmoil. A disorderly devaluation would be highly problematic for those on the wrong side of dollar-denominated debt.