Agcapita Update (continued)
Considering that global GDP is estimated at $70trillion the magnitude of these numbers beg thequestions of 1) how this will be nanced and perhapsmore importantly 2) at what rates?Other than the US bond market which seems wellbid for now (at least by the Federal Reserve), privatelenders are retreating from peripheral markets atthe rst hint of trouble. If this continues, either themonetary authorities will have to step in and monetisethe maturing debts or interest rates will have to riseconsiderably from current historic lows. We areseeing the outcome of this process taking place ona relatively modest scale in Spain and Greece - whatwill it look like when it goes global?Sadly, as the political class has become aware of therollover issue, rather than take any productive stepsto address their debt addiction, they have partneredwith the central banks to attempt to keep interestrates suppressed for an extended period - hoping thiswill allow business as usual to continue. Politicianswant to continue to run decits and central banks donot want “too big to fail” nancial institutions to sufferlosses on their loan portfolios. What both partieshave yet to learn is that you can control interest ratesor the purchasing power of money, but not bothindenitely. I am condent that the law of unintendedconsequences will be sure to provide that instructionin due course.
Austerity Chooses You, You Don’t Choose Austerity- Media and Keynesiam nostrums that the insolventsovereign borrowers of the world have a choicebetween austerity and a continuation of their debtbinges are bafing to read to say the least. When youare bankrupt you do not choose austerity, it is forcedupon you in one fashion or another.ZIRP is Old News - Watch out for NIRP- Yes ZIRPis now ofcially out of fashion. Pulling rmly into thelead in the race to the bottom, the Danish CentralBank recently announced that it was implementinga Negative Interest Rates Policy on certain deposits.ZIRP is dead, long live NIRP.Bank of America - In the Long Run- Recent report byBank of America on some long-run relationships andtrends.
CUMULATIVE DEBT MATURING OUT TO 2015
2012 2013 1014 2015 2016 2017 2018 2019 2020 2021 2022 2023+
By 2015, half of TOTAL outstanding debtin the world’s top 10 debtor nations willcome due, which is more than $15 trilliondollars of sovereign debt!
Source: PFS Group