Hello Grace, like CB, you are not worried about the absolute debt level or concerned about their service, because, in your frame of reference, debt service is always and forever a small percentage (5-10%) of the debt to be serviced, which in turn is a percentage (50-150%) of an overall meaningless and hedonically massaged aggregate known otherwise as GDP, because total debt amount relative to GDP has a market-imposed ceiling.
This is the same faulty logic used by Greensputin, namely that household debt service is still within historical norm, forgetting to mention that interest rate is at unnaturally low level relative to default rate, monetary inflation, etc because few body wants to borrow more if able and many bodies who wants to borrow will not be loaned to, consigned to financial death.
FYI, the debt service on Treasury debt to foreigners is over USD 60 billion, with them owning north of 34% of total treasury debt outstanding bondmarkets.com , and they own about 15% of corporate bonds asiaweek.com which entails more service payment, and we have not gotten to the munis, agencies, stocks, real estate, factories, etc, so on and …
The treasury debt service payment should be looked at in context of the fed budget deficit (300-600 billion), not as a percentage of GDP, or, you have an odd way of looking at P/L and balance sheets.
The issue is not the service amount, but the amount to be serviced, not to foreigners, but more pertinently, to the domestics and foreigners. I had always contended that trying to inflate the foreigners out of their money will harm the domestics much more, and in this harm, the foreigners are simply in for the ride in the same boat.
In your haste, you may have missed Greensputin’s recent warning about T-Pon-Rr, or the point of no return, where debt service spirals up and away, relative to budget deficit? Perhaps you too, as CB, are counting on Bernankaput to save the day, by printing.
We are learning that corporate balance sheet issues have consequences, and we will soon learn the same about national balance sheet, ala Russia, Argentina, Thailand, … and Japan. Maybe not Japan, because its people have savings, to be used by the government to save the people.
Balance sheet is not such a mysterious construct.
Dependency on global trade based on ever increasing public and private balance sheet impairment, forever global peace-keeping, and continuing recycling of funds based on trade deficit to sustain a hollow GDP increase leads to continued impetus to globalization, and with it, equalization of cost, and therefore revenue, and further impairment of balance sheet.
It is a brave new world. It has never been tried on such a scale. It will be profitable to watch, brief, and wager against.
I do not suppose you have gold money that rules over all cash, of the natural kingdom and forever empire?
In any case, your business, if I understand correctly, that of advising folks on their finances, should prove a growing business.
Chugs, Jay |
