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World Will Borrow $10.2 Trillion In 2011

From the Wall Street Journal:

Number of the Week: $10.2 Trillion in Global Borrowing

November 6, 2010

$10.2 trillion: The amount of money advanced-nation governments will need to borrow in 2011

As the debts of advanced countries rise to levels not seen since the aftermath of World War II, it’s hard to know how much is too much. But it’s easy to see that the risk of serious financial trouble is growing.

Next year, fifteen major developed-country governments, including the U.S., Japan, the U.K., Spain and Greece, will have to raise some $10.2 trillion to repay maturing bonds and finance their budget deficits, according to estimates from the International Monetary Fund. That’s up 7% from this year, and equals 27% of their combined annual economic output.

That is simply staggering. More than one fourth of these countries’ economic output will just go to servicing their debt.

Aside from Japan, which has a huge debt hangover from decades of anemic growth, the U.S. is the most extreme case. Next year, the U.S. government will have to find $4.2 trillion. That’s 27.8% of its annual economic output, up from 26.5% this year. By comparison, crisis-addled Greece needs $69 billion, or 23.8% of its annual GDP.

We are worse off than Greece. Greece.

So far, with the notable exception of Greece, major advanced nations haven’t had too much trouble raising the money they need. Japan’s domestic investors have consistently bought its government bonds despite their low yield. Foreign investors have been snapping up U.S. Treasury bonds, which remain the world’s premier safe-haven investment.

This is what all of Mr. Obama’s economic gurus have counted on. Indeed, they believe that they could triple our current debt without any problems, because it would just make Treasury bonds that much more desirable.

They are woefully mistaken. The US is not the only ‘safe-haven investment’ anymore.

Still, there’s reason to be concerned that governments’ appetite for borrowing could ultimately push up interest rates, or worse.

For one, government borrowers are tapping into smaller international capital flows. The total amount of foreign portfolio investment sloshing in across advanced countries’ borders averaged about 3.8% of global GDP in the twelve months ended June, compared to an average 9.5% in the eight years leading up to the recession.

Beyond that, the U.S. and other advanced nations are putting pressure on China to allow its currency to appreciate against the dollar. All else equal, such a move would curb demand for dollar-denominated debt from a country that is the largest foreign holder of U.S. Treasurys.

In the U.S., domestic investors could pick up the slack. The Federal Reserve has committed to buy an added $600 billion in U.S. government debt over the next eight months.

Which is the functional equivalent of giving a patient a blood transfusion from his left arm to his right arm.

Demand from households has been very strong as U.S. consumers boost their savings rate. Tighter regulations could push banks to buy more safe assets such as U.S. Treasurys.

Which could be one of the primary reasons we got Mr. Obama’s ‘financial reform.’

But as the IMF warned in a report this week, the chances that investors will balk at lending to governments “remains high for advanced economies.” That’s a highly undesirable outcome — picture a financial crisis in which governments can’t step in to help, because government finances are the problem. We can’t know how close we are to such an outcome, and the need to keep the recovery going would make cutting back now a risky move. Ultimately, though, we’re heading in the wrong direction.

And what is even more bizarre is that we are the only major country that is "heading in the wrong direction."

Everyone else is slashing government spending.

This article was posted by Steve on Sunday, November 7th, 2010. Comments are currently closed.

13 Responses to “World Will Borrow $10.2 Trillion In 2011”

  1. mr_bill says:

    Since the outgoing Congress failed to present a budget and hopefully will not do so in the lame duck session, the new Congress should propose a balanced budget. Federal receipts last year were about $2.1 trillion. The last time a Federal budget was $2.1 trillion was 2003. This is easy, get the 2003 budget and propose it for 2011. Budget balanced! The democrats and republicans were able to agree on that budget once so the second time around shouldn’t be too much trouble. That would send a strong message to the voters that the new Congress is serious and has listened to the people who voted for them. As a follow-up, the budget should be reduced by 5-10% every year thereafter, creating a surplus. It will be a lot easier to argue for maintaining the Bush tax cuts or future tax cuts with a balanced budget.

  2. Mithrandir says:

    Mr. tone-deaf in the White House says, “Let’s not misread the election results.”

    680 legislative seats went Republican

    Lost the House 60+ seats

    Republicans take +6 in the Senate

    Obama’s old Senate seat went Republican

    Democrats concentrated on health care, not jobs, is the worst economy in decades

    Democrats raised spending, and increased our debt in the worst economy in decades

    ~And after the shellacking he took, do you think this guy is going to get on the bandwagon, or continue to misread the results?

    • Rusty Shackleford says:

      A good synopsis that implies the boy’s not right somehow: http://www.americanthinker.com/2010/11/for_obama_there_is_no_other_tr.html

      A warped ideologue who is firmly convinced that spending every last dime will save the economy. Of course, in make-believe-land this might be worth prevaricating over but in obama-lama-ding-dong land, it is all about control, government takeover and having the citizenry punished so that he, and he alone can dole out alms and pick and choose who succeeds and who fails. He has had two solid years that have afforded the masses more than enough material to confirm his marxist beliefs. In his own written words he has admitted how much he hates this nation and how angry he is.

      He is a sick bastard, like all dictators of the last 150+ years and more, perhaps back to Roman times. They are always the same and the people are always slow to recognize them. Not all, but enough of a majority to put them into power over and over and over. The end result is the same only varying in degree. Pain, suffering, loss of opportunity, loss of freedom, more government power and abuse of same. Rules, rules and more rules. And isn’t it laughably ironic that the people who support this mess are largely hippies from the 60’s who were upset at all the “rules man”.

      However, for me, there has never been a greater “captain buzz kill” than Ba-rack, Hoo-sein, obama. Biggest jerk to ever be president.

    • tranquil.night says:

      It’s a matter of defining what “save the economy” means in the Obamanation. Simply put it into the context of what the ideas of the ideologue actually are: managing an America in decline into the next phase of global-feudalism.

      To that degree the Conservatives are all too correct in the assertion that Obama considers himself an immaculate success (except for how they marketed it coughcough).

    • proreason says:

      “Mr. tone-deaf ”
      “spending every last dime will save the economy”

      Not tone deaf. Not trying to save the economy.

      Deliberate destruction.

      Here is the way to look at it.

      – He is in the most important position in the world, with a sacred responsiblity not just to Americans, but really, to everybody in the world.
      – The responsibilities of the position are to defend the country and enact the will of the people.
      – No rational person would accept the responsibility, enact his agenda, watch it fail; then experience a massive rejection from his fellow countrymen, and not agree to modify that agenda…..
      – unless the person was motivated by something greater than the desire to do what is best for the citizens.

      He sees his mission as the destruction of our country. Losing an election does not effect on him whatsoever.

    • TwilightZoned says:

      “Not tone deaf. Not trying to save the economy.

      Deliberate destruction.”

      Well, this seems the perfect place for this. Check it out.

      Exclusive Interview: Sam Vaknin on Obama’s Narcissism – LaRouchePAC (Site stumbled on…trust me.)

      This interview takes approximately 62 minutes, if you have the time.

      Vaknin has written books on narcissism. He’s studied 1200 hours of Barry tapes. The analysis makes perfect sense to…well, most of us.

    • proreason says:

      Don’t be put off by the LaRouche website. This is a serious interview and Vaknin is a serious man.

      It is probably the most fascinating interview I’ve ever heard…..probably because it confirms the worst fears that I have personally expressed on this website many times.

      There is way to much to summarize, but a couple of points stick out:

      – “the guy is for sure a clinical narcissist” Actually worse, a malignant narcissist. And he can’t be cured. Obama can’t even do anything about it.
      – Vaknin can’t believe that the US could have elected the man, knowing what was known about him
      – He confirms that Obama is exceptionally dangerous, and that there are no limits to what he will do. He says that because of the framework of the US, it is impossible for Obama to act out like Hitler, but he will find other ways to be as dangerous….specifically, by destroying the economy.
      – “He is as slippery as the online masks of his supporters.”
      – Vaknin predicts Obama’s reaction to last week’s defeat will be major. He may provoke a Constitutinal crisis.
      – Vaknin is NOT convinced that Obama is intelligent. He has the impression that he is acting.
      – a mechanism inside “calculated evil” drives narcissist. They can’t overcome it. May are self aware, but they can’t stop it.

    • tranquil.night says:

      Thanks for elaborating on that source, Pro, very vindicating to the amateur psycho-analysis we’ve been informally here throughout the past couple of years.

      There’s something at the core of this which I’m still struggling to write coherently. It’s more than just the danger this malignant narcissist presents and the fact that he’s fully aware of and in fact premeditating the consequences of his words, actions, and policies – which he is. It’s truly that he is as philosophically convinced in the righteousness of it all for the greater cause, as committed to it as the Tea Party is to the real America.

      The Left attacks capitalism as narcissistic at it’s core because it acknowledges a basic human compulsion towards greed and that this is good. But there’s a big difference between greed and selfishness, which is what Liberalism advocates when you aren’t listening to the false rhetoric.

      It’s all the great thinkers of the Left whom justify narcissism, in fact they believe it to be at the root of all action. Their works are primers on how to manipulate those impulses in others to gain control over them. They acknowledge only one truth which is that of constant change, evolution, with collective social narcissism as the driving force. Thus “equality” and social justice take on new definitions than what we would say. In Liberalism, an elitist ruling classis is completely valid, inevitable, and in fact morally necessary to protect the little narcissists who weren’t fortunate enough to be born with their superior circumstances or intellect. That’s why these misanthropes smugly call themselves philanthropists.

      There is truly no redeeming this deranged mentality. To them, our definition of freedom is blind because of how we shackle ourselves to our principles and responsibilities.

      So they’ll impugn, malign, and subvert traditional Westernism until the end of their days because faith tells them that our world view is not only counter-progressive but at the root of all human conflict and sorrow. They’ll infect our culture with mass media – tv, news, movies, music, they’ll infect the precious institutions of education and science. They’ll get half the country to join them in their misery even while the sweetness and light of true liberty slaps them right in the face, even in the wake of terror striking our shores. Then they’ll seize power after battering a weak poltical opponent, and after recruiting some foreign and domestic bankers to help slice a big fat wound into the US economy at precisely the right time.

      Understand this and you understand how America ended up with Barry Obama and Corp in the driver’s seat.

      Liberals fancy themselves gods over a fallen world when we are a fallen people who will be made whole by the embracing the laws of the one true God.

      Liberalisms reign must finally meet it’s end. Completely.

    • proreason says:

      “They acknowledge only one truth which is that of constant change, evolution, with collective social narcissism as the driving force.”

      I have a different take on this.

      In my view, what has happened since 1776 is that social and economic evolution has been unleashed, which is the force that has made it possible for common people today to live like emperors of only a few decades ago. And that is anathema to the royalist / communists, whose sole desire is to create an invoilate two class stucture, with billions of peasants, unable to revolt, and, of course, the aristorcratic commissars ruling over it all. So they are determine to shut down the cultural evolution of humanity. In the short run, community organizers stir the pot. In the long run, their betters turn the gas off, even to the people who supported them in the short run.

      People have to be free, and ecomomies have to be free. There is only one alternative.


      History has proven it beyond any doubt.

  3. BigOil says:

    Add another layer to the economic house of cards.

    What else could we expect when we put three stooges in charge of the economy. A tax cheating bureaucrat, a lifetime academic, and a teleprompter reading Marxist.

  4. tranquil.night says:

    “Foreign investors have been snapping up U.S Treasury bonds, which remain the world’s premi haven investment.”

    What a joke. That’s why treasuries have fallen through the floor, such incredible demand. Makes total sense in the Universe of Lies.

    There are not enough buyers to service the debt fast enough, so it’s being forced on the Fed and the state-controlled zombie banks to keep the sinking ship afloat. Thats what this article says while trying to say the exact opposite.

    S&L regs have know exactly what’s up here since well before QE2.

    Edit: Great job Sarah.

  5. U NO HOO says:

    As we did in the great depression, we survived by doing each others’ laundry, we will survive the great recession by borrowing each others’ money.

  6. Coco Q. Rico says:

    amazingly, there are still people on my site blathering about Sarah Palin’s mediocrity and lack of education. My, what good the Ivy League has done for the world elite behind these figures. Auguste Comte can roll over in his grave until he drills a tunnel to the void below.

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