Posts Tagged public debt

Welcome to 2012! And $7.6T Debt Mountain!!

Update: scroll down to see a nice graph

Welcome to 2012, and a planet-load of debt! From Bloomberg, via Mish:

Governments of the world’s leading economies have more than $7.6 trillion of debt maturing this year, with most facing a rise in borrowing costs.Led by Japan’s $3 trillion and the U.S.’s $2.8 trillion, the amount coming due for the Group of Seven nations and Brazil, Russia, India and China is up from $7.4 trillion at this time last year, according to data compiled by Bloomberg.
The amount needing to be refinanced rises to more than $8 trillion when interest payments are included.

Country 2012 Bond, Bill Redemptions ($) Coupon Payments
Japan 3000 billion 117 billion
U.S. 2783 billion 212 billion
Italy 428 billion 72 billion
France 367 billion 54 billion
Germany 285 billion 45 billion
Canada 221 billion 14 billion
Brazil 169 billion 31 billion
U.K. 165 billion 67 billion

Japan’s Problem

Remarkably, rolling over US debt is unlikely to be a problem. The same cannot be said for Japan. Because of demographics, pension plans will be net sellers of Japanese bonds. Unless balance of trade or tax revenues increase enough in 2012 Japan will not be able to roll this debt over at 1%. A rise to 3% would consume nearly all of Japanese revenues.

But don’t worry, everyone, coz, a) Japanese debt is all held by Japanese, so only Japanese tax-payers will get screwed!
and b) Japan will raise VAT to a frigging awesome 8%!!!

Ha! Mission accomplished!

PS I’m posting this from Scribefire, a Firefox blogging plugin I haven’t used for a year at least, because WordPress’s “Press This” tool isn’t working for some reason.

Japan debt since the bubble burst, from seetell.jp

Japan debt since the bubble burst, from seetell.jp (http://bit.ly/zTitwT)

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2011/08/23 17:32 – ‘Bond Vigilantes’ Sizing Up Prime Minister Hopefuls

Update: My emphasis below. What is propping up Japanese government debt is “domestic banks’ insatiable appetite for bonds”. However, this appetite is limited by how much banks have in their accounts. Therefore, elementary my dear Watson, drawing down one’s bank account will hasten the day when domestic banks find government bonds less tasty.

An Aug. 2 report by Goldman Sachs Japan chief economist Naohiko Baba recently caught the attention of bond investors. It focused on how long domestic banks can keep adding to their holdings of JGBs. Baba predicts that as Japan ages people will begin drawing down their bank accounts to cover living expenses. That will sap banks’ investment funds, he writes, which will make it difficult for them to increase their JGB holdings sometime between fiscal 2016 and 2019.

Domestic banks’ insatiable appetite for bonds is one of the main reasons Japan has been able to support a public debt worth 200% of its gross domestic product. The bond vigilantes are trying to determine how long Japanese banks can keep up their purchases.

According to French economist and writer Jacques Attali, the sustainability of a country’s sovereign debt is as much a political as an economic phenomenon. The markets’ main concern is how serious heavily indebted governments are in tightening budgets and sparking economic growth. If that commitment looks doubtful, investors can rush for the exits.

via 2011/08/23 17:32 – ‘Bond Vigilantes’ Sizing Up Prime Minister Hopefuls.

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