That's a lot of money. Their latest Fiscal Monitor shows debt growth has vastly outpaced economic growth resulting in a collapsing marginal value of debt: in layman's terms, less bang for your buck. "The sheer size of debt could set the stage for an unprecedented deleveraging process that could thwart the fragile economic recovery". Vitor Gaspar, director of IMF fiscal affairs, reminded that, "most of the debt is concentrated in the world's richest economies…[and] while low income countries have relatively low levels of debt, many have sharply increased borrowing in recent years".
A fortnight earlier I was sent a report produced by the Europe-based ETF provider Source, comparing non-financial debt to economic output in the world's top 20 countries. Some you will be familiar with, like Japan leading the pack with almost 400 per cent of GDP. Next in line might surprise, the Netherlands (326 per cent), followed by France (of course, and 310 per cent), Spain (300), then Canada, Sweden and Italy with a smidgen under 300 per cent. In eighth place the UK's debt is just over the global average of 240 per cent, China and South Korea just under with 233 per cent.
In this study Indonesia had the lowest levels of debt to GDP (64 per cent) and of corporate debt (25 per cent); next in the pecking order Indian companies (holding 48 per cent of the country's debt), Russia (52), and Turkey (54). Bloomberg reports that the most indebted individuals live in Denmark and owe their banks about three times disposable income - although their assets are still worth more than their debts. A fragile balance in a country that has the longest history of negative nominal interest rates (since mid-2012). One wonders which is chicken and which is egg.
Japan 10-year
So, how much debt is too much and what does it cost to service? In Reinhart and Rogoff's famous book This Time is Different (2009), historically, when total public debt moves above 65 per cent of GDP, the warning lights should start flashing; domestically held debt is usually 'inflated' away while external debt can be defaulted on. They conclude: "our analysis suggests that banking crises (even those of a purely private origin) increase the likelihood of a sovereign default" because the nation helps out banks and those it has implicitly guaranteed.
US 10-year
Let's see who's paying what to borrow today. Japanese sovereign debt is usually locally owned by their prolific savers and, thanks to central bank policy, yields tended to be lower than anyone else's; now rates are zero and in Germany too thanks to the Bundesbank's obsessive focus on the currency's value. With a record low Fed Funds target, US Treasuries yield around 1.8 per cent. Switzerland's central bank targets minus 75 basis points - and sovereign bond yields are the most negative.
UK 10-year
You know you're seriously in hock when no one will lend.
Swiss 10-year
