It’s The Debt, Stupid – Massive Borrowing Binge Producing Fake Recovery
By Tyler Durden
Submitted by John Rubino via DollarCollapse.com,
What do the following headlines have in common?
US wages grow at fastest pace since 2009
Euro area economy ended year with strongest growth since 2011
Surge in home prices is beating the one in mortgage rates
Obviously they’re all favorable, with the possible exception of German inflation – though even that is “welcome”. Taken together they paint a picture of a global economy that’s finally returning to the kind of solid growth and steady, positive inflation that most people consider both normal and good.
Unfortunately, the reason for the improvement is emphatically not good: In 2016 the world borrowed a huge amount of money and spent the proceeds. The result is “growth,” but not sustainable growth.
Consider:
Federal Debt in FY 2016 Jumped $1.4 Trillion, or $12,036 Per Household
(CNSNews.com) – In fiscal 2016, which ended on Friday, the federal debt increased $1,422,827,047,452.46, according to data released today by the U.S. Treasury.
At the close of business on Sept. 30, 2015, the last day of fiscal 2015, the federal debt was $18,150,617,666,484.33, according to the Treasury. By the close of business on Sept. 30, 2016, the last day of fiscal 2016, it had climbed to $19,573,444,713,936.79.
According to the Census Bureau’s latest estimate, there were 118,215,000 households in the United States as of June. That means that the one-year increase in the federal debt of $1,422,827,047,452.46 in fiscal 2016 equaled about $12,036 per household.
The total federal debt of $19,573,444,713,936.79 now equals about $165,575 per household.
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Corporates Lead Surge To Record $6.6 Trillion Debt Issuance
(The News PK) – Global debt sales reached a record this year, led by companies gorging on cheap borrowing costs.
The bond rally that dominated the first half of the year helped entice borrowers that issued debt via banks to take on just over $6.6tn, according to data provider Dealogic, breaking the previous annual record set in 2006.
Companies accounted for more than half of the $6.62tn of debt issued, underlining the extent to which negative interest rate policies adopted by the European Central Bank and the Bank of Japan, as well as a cautious Federal Reserve, encouraged the corporate world to increase its leverage.
Corporate bond sales climbed 8 per cent year on year to $3.6tn, led by blockbuster $10bn-plus deals to finance large mergers and acquisitions.
The remaining debt included sovereign bonds sold through bank syndication, US and international agencies, mortgage-backed securities and covered bonds. The figures exclude sovereign debt sold at regular auction.
“The low cost of financing with record-low interest rates simply made building up leverage tempting,” said Scott Mather, chief investment officer for core fixed income at Pimco.
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Total global debt tops 325 pct of GDP as government debt jumps: IIF
(Reuters) – Global debt levels rose to more than 325 percent of the world’s gross domestic product last year as …read more
Source: It’s The Debt, Stupid – Massive Borrowing Binge Producing Fake Recovery
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