Topic: Global debt soars to 356% of GDP - page 2. (Read 500 times)

Hmmm, just saw someone’s comment that covid19 is a good thing because it caused the developed countries to be borrowing money. Seriously? I don’t see anything good about that, because if there is a situation that will cause the developed countries to be borrowing money, what about the developing countries?

These ones are likely to borrow ten times (10×) of what developed countries will borrow, and the worst part of it all is that they are still not going to achieve anything with it because their corrupt leaders will end up squandering the borrowed loans. I am not in support of that man.

I am not the bond expert but doesn't the rising bond yields mean that the US is having hard time with selling their debt? And as far as I know the FED is their primary customer that buys most of the US debt by printing money. (the other one is China)

We may have reached the end of the road.

As long as the governments can sell debt at the same low rate, then no. If things change, we'll see what happens.

Agreed. In this aspect Tesla and Bitcoin are very similar. Tesla represents the future of automobile industry, while Bitcoin represents the future of payments industry. Tesla and Bitcoin in 2020s will be similar to what Apple and Amazon was in the 1990s. But still in case of Tesla, I believe that it's P/E of >1,000 is a bit high for my liking. Similarly, even Elon Musk is now saying that Bitcoin prices look high.

The new innovations created by Tesla make this company very attractive positioning for investors.  Because with the new technology it is developing, it is one of the reasons for its rising shares.  Same with the actions of the owner buying BTC and being open to new innovations in the currency world, showing that this company is aware of every possibility that exists in the future.  Have a visionary and pioneer thinking.  I think this is quite representative of the increase in Tesla stock.

You are making a mistake comparing your debt and government debt. It is totally different what you do and what the government does and in economics this is considered a major fault to compare micro and macro scale.
This is called "fallacy of composition" and it is common mistake for people with very limited knowledge of economics.

Also the high debt doesn't necessarily mean that inflation will rise. You need to understand that high debt to be combated requires less liquidity in the market. In case the government keeps printing new money then inflation will reach higher and may even reach hyper inflation as we have seen in history. The countries that didn't officially declare bankruptcy but combated high debt and assured lenders by paying back the loans, they succeeded in having their economies less devastated and free of inflation. It is a lose-lose scenario, however it is about how to proceed with having the less dire consequences.

In case of cutting liquidity, inflation and debt can be combated, but a prolonged recession is also almost certain.


This is the way for most governments to deal with extreme economic situations. It is the worst decision to make and it a result of populism and a fake support to the economy. Living in the EU I can't say I am happy with the monetary policy of the pandemic, however the EU Central Bank reacted with a stricter approach than the FED.
A big problem that nobody addressed so far is how all this stimulus money will be paid back. Because even in Keynesian economics there is balance and a need to answer that. Governments can't keep printing and increasing debt forever. The US having in their soil the top three or four major rating agencies (S&P, Moody's,Fitch) they can manipulate their economy and bonds ratings for more years and have them at triple-A, even in the case the economy will collapse. We have seen how these agencies work during the housing crisis in 2008 having rated 45,000 failing securities as triple-A. Stonks kept going up and only a few foresaw the looming disaster.

Tesla is an electric car company.  Is it fair to say that most people have given up on combustion vehicles and started driving in electric vehicles?  Of course not.

One of the reasons for the rise in Tesla shares is precisely the fact that this company does not yet have real results of activity. 

Tesla is pure innovation.  Fantasies about the future can cost more than real material things.  This is what we observe. 

The situation is similar with Bitcoin and other cryptocurrencies.  Assets like Tesla shares and Bitcoin can be very expensive. 

At the same time, the main goal is to avoid inflation in consumer markets (rise in prices for food and household goods).

Due to the epidemic, many people have lost their jobs in the informal sector in the last few months production has declined in the agricultural and industrial sectors and many organizations have lost income in the service sector. To offset these losses, the government has increased allocations in various sectors and adopted action plans in order to boost economic growth the impact of COVID-19 has reduced exports due to prolonged global lockdown and the failure to achieve the desired growth in expatriate income has led to revision of GDP growth in the current financial year. The demand in the stock market has increased.

The rise in stock market was not solely due to speculation. The stocks that rose the most are Apple, Amazon.etc. If you look at the quarterly results for these stocks, then you can see that their performance was really good. Amazon sales increased by a lot during the pandemic period and some of the Apple products also achieved record revenues. The same can be said about Tesla. Their 2020 revenues were almost double that of the revenues for 2019. So I would disagree if you claim that the stock market rally is looking like a bubble.

It's stimulus but it's also because the stock market is reckless with speculation. I wouldn't be surprised to see a bunch of new investors throw in 600 USD into whatever stock they want causing an artificial rise though.

BTC can be the same way to be fair, but you can't measure the economy based on stocks. Look at Tesla's stock, it's a bubble on the verge of being popped, and this will happen regardless of where the economy's at.

I hope the same thing doesn't happen, but in the Weimar Republic (Germany) before the hyperinflation period, there was a very bullish period in the stock market. Simply because, as you say, when money is massively printed, much of it ends up in the stock market.

Correct. How come stonks still go up when almost nobody is working or at least half of the world economy is destroyed? The answer is: Stimulus money. The growth is fake.

They are doing everything they can to stop the collapse and hoping that they can print enough till things go back to normal but what if it doesn't in the next 10 years? Then I guess everybody will have to live on the government checks forever...

The stock market isn't an accurate reflection of where the economy is at, but to your point, the central banks don't have to pay back any money -- but they do if they want to retain public confidence. If a country fails to pay back any "loaned" amount of money, the currency turns to dust. So the incentive to not default is there.

The most speculative tech stocks have risen in just about the same proportion as bitcoin since the start of the pandemic. There's been nothing inherently special about bitcoin in this regard. The money printer is raising the tide of all speculative assets at about the same rate.

Also, countries don't have to pay back the money that was printed. That's kind of the whole issue with central banks.

It's so sad that these things happened because of the Pandemic thing, imagine those people who are suffering on Povert. The rich people became rich, while poorer people became much poorer.

I wonder if governments are still justifying their massive piles of debt with the excuse of "low interest environment therefore we don't need to worry about servicing costs on the debt" now that long term market rates on bonds have hiked again.

These are debt levels that have not been seen since WWII - and in some cases, totally unwarranted stimulus packages.

The result is highly inflated asset prices, arbitrary pump & dumps on random stocks, and a real risk of reflation gone wrong in the near future. You'd be delusional to think that this system is sustainable under this type of stress.

You can check the federal debt on a real time basis here:

https://www.usdebtclock.org/

If I am not wrong, when Trump first came to power the debt was below $20 trillion. Four years later, it stands at almost $28 trillion. That is $2 trillion in debt added in each year during the presidential term. And the future projections are even more horrendous. Check this:


Now in the form of the COVID 19 pandemic, the governments around the world has got a stellar excuse to indulge in more and more debt creation.

Well the debt is denominated in sovereign bonds. If you have a life insurance, a pension fund, all kinds of investments, you probably own sovereign bonds. From your own country, and from other countries too (for example from countries that pay more interest, earning you more).

Then there are central banks who buy bonds from other central banks. Japan and China own tons of US treasuries for example.

All those nations actually pay a "tax" of sorts to IMF in order to get that debt when they need it. Not like IMF is filled with some rich people or it is not like it is just a bank you and I can go open a bank account and get a line of credit or something, IMF is built differently where nations put some money in there whenever they have to actually need it back and that is why whenever you are in trouble you ask for money as government.

The reality is that if you are a bad nation with no democracy and a dictatorship and no good economical future potential even if you pay them they may decline to give you a loan but that is a very high end situation since those nations can get money, it shouldn't' t be "debt" since they paid for it anyway.

This should be very alarming to all of us. Countries keep on printing money without any real plans in place on how to pay back these funds. Your two charts are probably the best justifications on why the global monetary systems are doomed in the long run. This party is going to stop, there is no way this can keep on going on forever. Eventually people will wake up and just stop believing in the system. That is also why it is so good to invest in crypto currencies rather than FIATs.