Nearly one-quarter of all government-issued notes around the world now have a negative yield. (26 Feb 2019) For the minority of economists arguing for more Fed rate hikes, the chief argument has been that the central bank needs to re-stock its ammo pile to be prepared for the next economic downturn. The higher the rates, the more the government can lower those rates to spur economic activity. Compared to the rest of the world, however, it appears that the US Treasury has the largest stockpile of ammo. It is a difficult concept to fathom, but right now nearly one-quarter of all government-issued notes around the world offer a negative yield to investors. $8 trillion worth of bonds around the world will pay investors precisely zilch in interest. That is wrong in so many ways, but here's the most pressing concern: economic activity around the world is slowing, but the central banks will watch their respective economies fall while they sit with their hands tied behind their backs. Japan and developed Europe—especially Germany—are the most at risk, in our opinion. On the sliding yield curve, you would have to go out eight years to find a German bond yielding anything above 0.0%. On a bright note, Japan's 10-year bond now offers investors a positive yield: 0.01%. Incredible. A lot of blame for the economic slowdown has been placed on Trump's trade battle with China, but global government wonks need to look in the mirror to find the real culprit—it has simply been too easy of an "out" to put new charges on the government credit card. Odds are great that we will see a US/China trade deal reached soon. However, this will not be a panacea for the global debt crisis. Responsible government behavior is the only solution, but—from Brussels to Tokyo to DC—when is the last time we saw that manifest in a real and lasting manner?
(04 Apr 2017) Global debt hits unthinkable (and unsustainable) $215 trillion. The Institute of International Finance (IIF) is a global association of financial institutions that was born out of the international debt crisis of the early 1980s. The group just released a report on the current level of global debt, and the figures are staggering. A decade ago, the world was awash in debt to the tune of $65 trillion, with the US accounting for about $8.5 trillion of that amount, or 12%. Today, global debt levels have reached an almost-unfathonable $215 trillion, with the US accounting for $20 trillion of the figure, or 9.3%. Put another way, global debt is now equal to 325% of global GDP. Should we celebrate the fact that we now hold a smaller percentage of the world's outstanding debt load? Umm...no. Both figures are unsustainable and are a threat to global peace and prosperity. Now, take a look at the leadership structure in places like Europe, and form an opinion on whether or not the problem will be solved or exacerbated.