WARNING ON $57 TRILLION SURGE IN GLOBAL DEBT

A new McKinsey Global Institute study finds:

Seven years after the bursting of a global credit bubble resulted in the worst financial crisis since the Great Depression, debt continues to grow. In fact, rather than reducing indebtedness, or deleveraging, all major economies today have higher levels of borrowing relative to GDP than they did in 2007.

“Global debt in these years has grown by $57 trillion, or 17 percent of global GDP (Exhibit 1). That poses new risks to financial stability and may undermine global economic growth.”

A key finding in the report is “debt-to-GDP ratios have risen in all 22 advanced economies in the sample, by more than 50 percentage points in many cases”

The report “pinpoints  three areas of emerging risk:

“The rise of government debt, which in some countries has reached such high levels that new ways will be needed to reduce it;

“The continued rise in household debt—and housing prices—to new peaks in Northern Europe and some Asian countries; and

“The Quadrupling of China’s debt, fueled by real estate and shadow banking, in just seven years.”

The McKinsey Global analysis follows their July 2011 report Debt and deleveraging: The global credit bubble and its economic consequences and their  January 2012 report Debt and deleveraging: Uneven progress on the path to growth, and “focuses on the debt of the “real economy”: governments, nonfinancial corporations, and households.” 

 

 

 

GOLD REMAINS A STORE OF VALUE IN SEVERAL MAJOR CURRENCIES

 

Figure 3: Gold: USD, Brazilian real (BRL), Indian rupee (INR) & Russian ruble (RUB) perspectives

Source: Bloomberg Professional, GOLDS, BRL, INR and RUBLE

Chart above & Quote below from CME Group comment on oil and gold

“.. gold has fallen in recent years from a USD perspective, but has held steady or risen from the perspective of investors in many developing economies of the world, maintaining its role as a store of value (Figure 3). Indeed, declines in many emerging market currencies versus the US dollar may have also led to demand for gold from this sector.”