Friday, October 8, 2010

Imminent Collapses Everywhere

SocGen: Global Debt Will Increase By 50% Over Just Two Years
6 October 2010
, by Vincent Fernando (Business Insider)


The U.S. isn't the only nation adding government debt at a torrid pace. Europe is, Japan is, and actually many smaller economies are as well. Most nations around the world enacted some form of stimulus spending after the financial crisis and this chart below from Societe Generale shows the net result.

By 2011 global debt will have increased by 50% in just two years, and the firm forecasts that the situation could potentially get far worse (see the red dotted line), depending on the actions of developed nations. If anything, this chart shows how developed nations have become the world's basket case economies, while emerging markets have managed to keep debt under control.

S&P Warns Global Debt Level Would Reach 245% By 2050

10/8/2010 10:05 AM ET

(RTTNews) - Absence of appropriate budgetary adjustment, additional reforms to pension and health-care systems, or structural measures to improve sovereigns' growth potential, will raise future fiscal burden significantly across the world, rating agency Standard and Poor's said Thursday.

The projected deterioration in public finances over the period 2010-2050 is particularly significant in advanced economies and emerging market economies in Europe, the rating agency said in a report.

S&P estimates that median general government net debt as a percentage of GDP in 49 countries will be on "explosive" path to almost 245% by 2050, up from below 40% of GDP currently. That compares with 2007 estimate of 148% of GDP. Government spending may rise to almost 60% of GDP in 2050, up from the current level of 44.2%.

The rating agency found that population aging will lead to profound changes in economic growth prospects for countries around the world, alongside heightened budgetary pressures from greater age-related spending needs.

"The erosion in sovereign ratings would start in 2015, when hypothetical ratings on a number of highly rated sovereigns come under pressure," the report said.

by RTT Staff Writer

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The clock is ticking. Every second, it seems, someone in the world takes on more debt. The idea of a debt clock for an individual nation is familiar to anyone who has been to Times Square in New York, where the American public shortfall is revealed. Our clock shows the global figure for all (or almost all) government debts in dollar terms.

Does it matter? After all, world governments owe the money to their own citizens, not to the Martians. But the rising total is important for two reasons. First, when debt rises faster than economic output (as it has been doing in recent years), higher government debt implies more state interference in the economy and higher taxes in the future. Second, debt must be rolled over at regular intervals. This creates a recurring popularity test for individual governments, rather as reality TV show contestants face a public phone vote every week. Fail that vote, as the Greek government did in early 2010, and the country can be plunged into imminent crisis. So the higher the global government debt total, the greater the risk of fiscal crisis, and the bigger the economic impact such crises will have.

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