patrick.net

And that boys and girls is the point.

Point A: The solution involves borrowing less from the rich and taking more instead.

As for Japan:

"But it is hard to look at the balance sheet of the world’s third-largest economy and not wonder how this can end well."

Internal debt isn't the important balance sheet (cf. Point A, above). NIIP is, and Japan Inc. enjoys a NIIP nearly equal to the next two economies (China & Germany) combined.

What credit has done has given us an 'illusion of [wider] prosperity' than we actually have.

In 2008 the loss of the $100B/month flow via the mortgage bubble killed the economy.

Government responded by accelerating spending:

real per-capita gov't spending (all levels)

which helped a bit

The strange thing about this article is that it comes not from ZeroHedge, but from the NY Times.

Bellingham Bill says

Internal debt isn't the important balance sheet (cf. Point A, above). NIIP is, and Japan Inc. enjoys a NIIP nearly equal to the next two economies (China & Germany) combined.

Good point, once again the current account tells the tale.

Bellingham Bill says

real per-capita gov't spending (all levels)

Works a lot better in countries that have debt, not so much in Japan, Germany, or China. Not that it isn't a temporary fix.

Heraclitusstudent says

The strange thing about this article is that it comes not from ZeroHedge, but from the NY Times.

From the chart in the article, USA is doing pretty good. Russia is even better.

Strategist says

From the chart in the article, USA is doing pretty good. Russia is even better.

Im guessing when the USSR collapsed the value of things had to be corrected, IOW marked to market.

Argentina just can't get credit, not to mention confiscating pension funds to pay government debt.

Strategist says

From the chart in the article, USA is doing pretty good. Russia is even better.

Yeah but Russia does not have access to dollar funding which demonstrates how important liquidity is. Central banks have no choice but to provide it until we have negative real interest rates everywhere.

Call it Crazy says

The world economy is still built on debt.

That's the warning today from McKinsey & Co.'s research division which estimates that since 2007, the IOUs of governments, companies, households and financial firms in 47 countries has grown by $57 trillion to $199 trillion, a rise equivalent to 17 percentage points of gross domestic product.

It sounds horrible, but isn't. I'll tell you why.
It's not the total debt that always matters, but the ability to service that debt.
GDP has grown during that time, making it easier to pay back the debt.
Interest rates have fallen during that time, making it easier to pay back the debt.
The ability to pay back that debt has considerably improved.

tr6 says

Strategist says

From the chart in the article, USA is doing pretty good. Russia is even better.

Yeah but Russia does not have access to dollar funding which demonstrates how important liquidity is. Central banks have no choice but to provide it until we have negative real interest rates everywhere.

A lot of debt Russia owed would be in their own currency. When their interest rates skyrocketed, the value of that debt would collapse. When the Ruble collapsed, the value of that debt would collapse even more. The big losers, as usual, would be the bond holders.

Strategist says

It's not the total debt that always matters, but the ability to service that debt.

You don't seem to get it. It's tinder for crisis. It's like a forest with a lot of dead wood ready for a firestorm. One big default and dominoes start to fall.

"ability to service that debt" goes from obvious good to obviously bad in a few dominoes.

Strategist says

It's not the total debt that always matters, but the ability to service that debt.

GDP has grown during that time, making it easier to pay back the debt.

Not really but since you are not a mutt I will be kind. The problem with your assertion is that there is no price discovery. So what does this debt buy? Is it a better use of the money than what price discovery would determine is a good investment?

Strategist says

Interest rates have fallen during that time, making it easier to pay back the debt.

The ability to pay back that debt has considerably improved.

In about 15 years that theory is going to be put to the test because the debt service now is being serviced at very low interest, when it returns to historic norms of 5-6% that 500 billion dollar debt service turns into over a trillion dollars.

Then when the boomers are all on entitlements, that is going to be all she wrote.

Strategist says

GDP has grown during that time, making it easier to pay back the debt.

No it didn't. The debt as percent of GDP grew.