Tuesday, January 03, 2012

Yikes! Total amount of debt that must be refinanced in 2012 equal to... only about all of the cash in the world

The global Ponzi scheme needs some fresh fish new recruits -- desperately:

Developed economies will see $7.6trn worth of debt mature this year, with Italy towards the front of the refinancing queue at a time when its borrowing costs remain elevated.

The $7.6trn figure for the G7 economies and the BRICs is up from $7.4trn last year, according to Bloomberg, and comes at a time of slowing global growth and higher bond yields for many countries.

Japan and the US, which will have to rollover $3trn and $2.8trn worth of debt respectively in 2012, saw borrowing costs drop in 2011 as investors fled to safe havens.

But Italy, which remains at the epicentre of the eurozone crisis, has to rollover $428bn this year. This is the third highest amount, followed by France with $367bn and Germany on $285bn.

Italian 10-year bond yields continue to hover around the critical 7% mark, the figure currently standing at 6.88%, and the country had mixed fortunes with two debt auctions at the end of 2011.

But wait -- that's not all!

Turns out that there's another $1 trillion in corporate debt that must be rolled over this year as well.

All-in-all, the debt loads are becoming awesome and face what Bloomberg describes as a bad combination:

"The buyer base for peripheral Europe has obviously shrunk at the same time that the supply coming to the market is increasing, which is not a good combination," said Michael Riddell, a London-based fund manager at M&G Investments.

...but we agree with the following that it will be mid-year (March onwards) that the real problems of excess supply hit (and pre-judging when this gets (or how much of this is) priced into forwards is anyone's guess):

Investors should be most worried about the period after the ECB’s second three-year longer-term refinancing operation scheduled in February, according to Ignis’s Thomson... "The amount of liquidity that has been supplied by central banks, with more to come from the ECB in February, suggests the first couple of months will be a sort of phony war as far as the supply is concerned."

But, wait -- I'm not done!

Care to guess how much short-term consumer credit card debt needs to be rolled? According to CreditCards.com, there's about $800 billion in revolving debt on Americans' plastic.

In short, it would appear that the world needs to find someone to loan it about $10 trillion this year alone.

And how much cash is there in the world?

While it's difficult to say with any certainty how much cash and cash equivalents are floating around at any given time, the last estimate by Mike Hewitt in 2009 produced a figure of around $12.3 trillion.

So, basically, we need almost all of the cash in the entire world to fund this year's debts (and don't ask about the next few years).

The good news: if Paul Krugman can pull off that alien invasion he proposed a few months ago, we could find some new marks investors in the global Ponzi scheme.


Reliapundit said...

stop fearmongering doug; you know all they have to do is PRINT MORE MONEY!


directorblue said...

Eh, good point. Forgot about that!