Home > The Massive Debt Bomb: $7,600,000,000,000 Dollars Of Debt Must Be Rolled Over In 2012
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The Massive Debt Bomb: $7,600,000,000,000 Dollars Of Debt Must Be Rolled Over In 2012

January 25th, 2012

Michael Snyder: When it comes to government debt, it is not just new debt that is the problem.  Every single year, governments around the world must “roll over” gigantic mountains of debt that come due.  That means that the actual borrowing that takes place each year is far greater than the yearly budget deficits that you see talked about on television.  In 2012, a total of 7,600,000,000,000 dollars of debt must be rolled over by the G-7 nations, Brazil (NYSEArca:EWZ), Russia (NYSEArca:RSX), India (NYSEArca:EPI) and China (NYSEArca:FXI).  When you add in interest payments, that number rises to over $8 trillion.  And that does not even include any new borrowing that all of those nations will do in 2012.  This is a debt bomb that could devastate the entire global economy at any time.  Everything will be fine as long as global lenders are willing to lend these countries gigantic mountains of very cheap money.  But if that changes, and there are already a multitude of signs that a massive global credit crunch has begun, it will mean a complete and total financial nightmare for the entire world.

The following list compiled by Bloomberg shows the amount of debt that these various nations must roll over in 2012….

Japan: 3,000 billion

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U.S.: 2,783 billion
Italy: 428 billion
France: 367 billion
Germany: 285 billion
Canada: 221 billion
Brazil: 169 billion
U.K.: 165 billion
China: 121 billion
India: 57 billion
Russia: 13 billion

Up until recently, these powerful nations have been able to easily roll over their debts each year because lenders have been willing to shower them with gigantic quantities of very cheap money.

But in 2011 bond yields for many European nations really started to soar.  When the cost of borrowing goes up, that puts a lot more pressure on the finances of nations that are already very deep in debt.

According to Bloomberg, it is being projected that borrowing costs for G-7 nations will rise very rapidly in 2012 as well….

Borrowing costs for G-7 nations will rise as much as 39 percent from 2011, based on forecasts of 10-year government bond yields by economists and strategists surveyed by Bloomberg in separate surveys.

Rising borrowing costs are a major reason why Italy is on the verge of financial collapse right now.

A year ago, the yield on 10 year Italian bonds was below 5 percent.  Today it is up around 7 percent.

During 2012, Italy must refinance approximately $428 billion of government debt.  If the rest of the world is not willing to buy that much Italian debt at current interest rates, that it going to create a major crisis.

Of course the European Central Bank could intervene even more than it has been, but there is a limit to what the ECB can do under current agreements.

The truth is that the European Central Bank has already spent over 274 billion dollars buying up the government bonds of troubled European nations such as Greece, Italy, Portugal and Ireland in an attempt to control the rise of bond yields.

But even with such unprecedented intervention, bond yields have still risen substantially.

Germany and other northern European nations are adamantly against the ECB directly funding the deficit spending of profligate southern European nations.  Germany has insisted that troubled nations such as Greece and Italy deal with their debt problems by implementing brutal austerity programs.

But all of this austerity will almost certainly bring on a major recession.  The following analysis comes from a recent article by Ambrose Evans-Pritchard….

The European Central Bank has guaranteed trouble by letting M3 money contract. Fiscal tightening into the downward slide will make matters worse. A credit crunch as banks shrink loan books by €1 trillion to meet capital ratios will do the rest. All policy levers are set on deep recession, and deep recession is what Europe will get.

And a deep recession will only make the debt problems of European nations even worse.

But Europe is not the only one in trouble.

Japan is also on the verge of complete and total financial collapse.  The government of Japan spends more than twice as much as it brings in, and public debt has risen to 237 percent of GDP.

Up until now, the Japanese government has gotten away with this because the Japanese people are great savers and they have been willing to lend huge mountains of money to the Japanese government for very little return.

But there are signs that the situation in changing, and if interest rates on Japanese debt go up even just a few percentage points it is going to be a total nightmare for Japan.

There is simply way too much debt all over the world.  Greece thought that they would be able to borrow cheap money forever, but now look at them.  The yield on 2 year Greek bonds is now up to 134%.

All of these nations that are gobbling up cheap money now should take note that this supply of cheap money will not last forever.

Unfortunately, our world has gotten completely and totally addicted to debt.  The following comes from a recent article by John Mauldin….

Total debt-to-GDP levels in the 18 core countries of the Organisation for Economic Co-operation and Development (OECD) rose from 160 percent in 1980 to 321 percent in 2010. Disaggregated and adjusted for inflation, these numbers mean that the debt of nonfinancial corporations increased by 300 percent, the debt of governments increased by 425 percent, and the debt of private households increased by 600 percent.

Of course the biggest debt of all is the national debt of the United States.  As of this moment, the U.S. national debt is $15,222,940,045,451.09, and the debt recently surpassed the 100 percent of GDP mark.

So why haven’t things collapsed already?

Well, it is because the U.S. can still borrow massive amounts of cheap money.

Right now, the average interest rate on U.S. debt is approximately 2.18 percent.

That is very, very low and it will not last forever. When it rises we will be in a heap of trouble.

And in future years our debt is projected to rise to absolutely insane levels.  The following chart comes from a GAO report that was just released.  To be honest, the projections that the GAO report uses are so optimistic that they are beyond ridiculous.  But even using those ridiculously rosy financial estimates, U.S. government debt is still projected to skyrocket to absolutely unprecedented heights in future years….

Once again, please keep in mind that the GAO chart above is based on projections that are unbelievably optimistic.

We are in a massive amount of trouble my friends.

At this point, we owe the Chinese nearly a trillion dollars.  They are running out of things to do with all the money they have gotten from us.  Recently it came out that the Chinese actually want to buy Yahoo.

We are mortgaging our future, and for what?

We have been so incredibly foolish.

So what is the solution?

How will our “leaders” solve our debt problems?

Well, world famous investor Kyle Bass recently said that a senior member of the Obama administration told him that “we are just going to kill the dollar“.

That doesn’t sound good.

So are we really going to print our way out of trouble?

Or will our financial system just simply collapse under the weight of so much debt at some point?

If our system does collapse, people are going to want something new.  Unfortunately, a growing number of Americans seem to think that socialism is the answer.  According to a new Pew Research Center poll, Americans between the ages of 18 and 29 actually have a more favorable view of socialism than they do of capitalism right now.

That is very sad.  The truth is that America has already been marching towards socialism for many decades.  The federal government just keeps taking more of our money and just keeps spending more of our money.  The following chart below shows how federal receipts have risen as  a percentage of GDP over the last 60 years….

If there is a massive global financial collapse, another solution that will inevitably be put forward is for the world to adopt a global currency.

The seeds for this have been planted for many, many years.  In dozens of books, television shows and movies about the future a “global currency” plays a major role.

Sadly, more than 40 percent of all Americans believe that we will see a global currency by the year 2050.  The following comes from a recent article in Wired Magazine….

But does this mean we don’t see a global currency in our future? For many, the answer is no. A recent Pew Research poll reveals that 41 percent of Americans expect it by 2050. Maybe the idea has been planted in our heads by leftist utopians and science fiction authors: a system of “credits” is used in everything from Star Wars, Star Trek, and Babylon 5 to the Foundation book series. Yet the idea has also been touted by economics titans like John Maynard Keynes.

Let us hope that the United States never is part of a global currency, because that would be the end of our national sovereignty.

But one thing is for sure – the world will never be the same after this debt crisis plays out.

Enjoy the prosperity of today while you can, because there is no way that it can last.

A massive financial collapse is coming, and it is going to shake the entire globe.

Sadly, most people simply do not care about the debt bomb that is hanging over the nations of the world, and the coming crisis is going to devastate their lives without any warning.

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Written By Michael Snyder From The Economic Collapse

Michael has an undergraduate degree in Commerce from the University  of Virginia and a law degree from the University of Florida law school.  He also has an LLM from the University of Florida law school. Michael  has worked for some of the largest law firms in Washington D.C., but now  is mostly focus on trying to make a difference in the world.


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  1. Kent Dorfman
    January 29th, 2012 at 13:34 | #1
  2. IJ
    January 27th, 2012 at 14:39 | #2

    Though I suspect unintentional, this does make a good propaganda piece, meaning it lends too much legitimacy to a monetary system that was designed to shift a greater portion of the population, post-slavery, into the new slave/wage earner class and covertly steal any savings that they could accumulate. Never mind that this monetary system, even as a tool for larceny, has reached its growth limits for functionality. The real economic growth required to sustain it is no longer possible. The coming replacement, for which we are in a transition as we speak, is total financial repression and totalitarianism, for as long as established militaries can be used by the ruling elite to enforce this condition.

    Quoting the article “Let us hope that the United States never is part of a global currency, because that would be the end of our national sovereignty.”

    I am sorry to be the one to have to tell you this but US sovereignty ended 100 years ago next Christmas, with the birth of the current monetary system. You need to get your concepts straight. What it’s going to be the “end of” in the US is the low cost of imports that make it possible to live on the monetized value of current wages. This includes energy and yes food too because fertilizers for growing food (and feed) are also imported.

    You have to think this through another step as well. With supply-chain interruptions, food shortages, and energy interruptions, there will be civil unrest on a scale that will require a military to keep it quelled. We are almost there now, hence legislation like NDAA, just in case any judges get it in their heads during this transitionary phase that they are going to exercise any morality. There will be no need for judges once the transition is complete.

    This will be especially important in places like the US given that there is a major elephant in the room that cannot be ignored. The US has the world’s largest stockpile of nuclear weapons that need to be tightly controlled on a continuous basis. The US also has a high density of nuclear reactors and waste sites that also need to be maintained on a continuous basis. There cannot be any interuptions in the maintenance and security of these facilities. There cannot be any interruptions in the maintenance and security of the waste sites alone, otherwise the land they are on (effectively the entire eastern seaboard and entire states), potentially become un-inhabitable. Therefore the owners cannot simply hit the reset button on the monetary system, have us all endure a period of severely hard times far worse than the 30′s, and simply muddle through. No, it has to be a controlled transition into a new order, a new order that has to stand right now and has no tolerance for the wishy-washiness of rightwing-leftwing, illusionary-democracy politics.

    No one in the slave class is going to be happy with this arrangement and if the greed of a certain few was held in check one fateful Christmas in 1913, I’m sure we could have done a lot better and would not be in this predicament. Right now, human nature being what it is, I see no other alternative.

  3. Rastaman
    January 27th, 2012 at 12:50 | #3

    Mr. Benanke…. you’re an economics GURU….tell me again how prices GO UP in an over supplied bond market?!

  4. January 27th, 2012 at 12:10 | #4

    Your commentary reminds me of that 1981 movie “Rollover.” Eight years before that, there was a song, released back in 1973 called “Creepin’,” by Grand Funk Railroad. It’s amazing how artists of those times tried to warn us. Guess no one appreciated just how far things could get out of hand.

  5. Phil
    January 27th, 2012 at 11:27 | #5

    Hhmm, I take you point about the debt being bad but saying it’s heading to socialism is nonsensical to me.

    I would like to see a chart with war spending stripped out and I expect those debt to GDP ratio numbers would be close to flat or in surplus. What does this mean? That far from heading to socialism you have already become a society based on militarism. Your priorities are not helping the poor or needy but are focused on stealing the resources of other nations and perpetuating the military industrial complex.

    Furthermore, the majority of the country’s debt, not just public but private and financial, was added once the neoliberal economic policies of Reagan, Bush 1, Clinton, Bush 2 and Obama were followed. Rampant deregulation is a much bigger factor than socialism.

    The despots are already here and it’s called the US political system. Both parties are identical and all politicians work only for the money of the elite corporations and individuals. Corporatism I believe it’s called.

  6. Ian Mathers
    January 27th, 2012 at 01:07 | #6

    It isn’t that they have to borrow to roll over, just make sure the investors are willing to receive only their interest payments. The issue should be the new borrowing above the old. Just as those in the paper silver/gold market keep rolling over, the problem is easy to handle until those holding the paper actually want their capital returned.

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