Sunday, September 28, 2014

I guess 'Industrial Disease' is now an official diagnosis

The International Centre for Monetary and Banking Studies isn't pulling any punches in its latest annual Geneva Report.  The Financial Times reports:

The 16th annual Geneva Report ... predicts interest rates across the world will have to stay low for a “very, very long” time to enable households, companies and governments to service their debts and avoid another crash.

The warning, before the International Monetary Fund’s annual meeting in Washington next week, comes amid growing concern that a weakening global recovery is coinciding with the possibility that the US Federal Reserve will begin to raise interest rates within a year.

. . .

... the report documents the continued rapid rise of public sector debt in rich countries and private debt in emerging markets, especially China.

It warns of a “poisonous combination of high and rising global debt and slowing nominal GDP [gross domestic product], driven by both slowing real growth and falling inflation”.

The total burden of world debt, private and public, has risen from 160 per cent of national income in 2001 to almost 200 per cent after the crisis struck in 2009 and 215 per cent in 2013.

. . .

Luigi Buttiglione, one of the report’s authors and head of global strategy at hedge fund Brevan Howard, said: “Over my career I have seen many so-called miracle economies – Italy in the 1960s, Japan, the Asian tigers, Ireland, Spain and now perhaps China – and they all ended after a build-up of debt.”

There's more at the link.  Underlined text is my emphasis.

I've written about the problem of debt many times in these pages.  It's . . . well, it's not exactly 'nice' to see it being re-emphasized in the financial media, but it's somehow grimly satisfying.  There are still those who argue that debt's not a problem for sovereign nations because they can print the money to repay it, or replace 'old debt' with 'new debt', or inflate it out of existence, or even simply refuse to repay it . . . but we're not hearing so much of their idiocy any more.  People are waking up to reality.

Business order, industrial counter-order and economic disorder . . . I think Dire Straits got it right in 1982.

Was it really more than thirty years ago that they released that albumDamn, I'm getting old . . .


1 comment:

Old NFO said...

I actually don't remember that one... sigh