Posted on 09/21/2023 4:53:46 AM PDT by davikkm
Global debt has surged to a staggering $307 trillion, marking an increase of $10 trillion in just the first half of 2023. This soaring debt level is ringing alarm bells and has pushed liabilities to record highs, up by an astonishing $100 trillion over the past decade. It’s becoming increasingly clear that we are on the brink of a monumental debt crisis.
S&P Global’s recent revelation that global debt has breached the $300 trillion mark for the first time in history is nothing short of jaw-dropping. To put it in perspective, this debt load represents a mind-boggling 349% of the world’s GDP. If this debt were evenly distributed among the global population, every man, woman, and child would bear a debt burden exceeding $36,000.
In essence, this is an incomprehensibly massive debt bomb, and the fuse has been ignited by inflation. The dynamics are interconnected: bond yields, among other factors, are influenced by inflation. As inflation made its way into the financial system in 2021, it was only a matter of time before bond yields started to rise.
Higher bond yields translate to larger debt payments, making servicing the debt increasingly challenging. For instance, at a yield of 0.25%, servicing $1,000,000 in debt costs just $2,500. However, at a yield of 5%, that same $1,000,000 debt now demands $50,000 for servicing. The 10-year note yield has climbed as high as 4.37%, reaching levels last seen in 2007.
These escalating rates persist despite an anticipated Fed rate pause. The United States is issuing unprecedented volumes of Treasury Bonds to finance deficit spending, leading to an oversupply that drives down bond prices and pushes Treasury yields higher. Over the current and upcoming quarters, a staggering $1.9 trillion in US Treasury bonds will be issued.
The cost of deficit spending is manifesting in various ways, and higher interest rates are among them. Since the conclusion of the debt ceiling “crisis,” the US has accumulated an additional $33 billion in debt per day, with daily interest expenses nearing $3 billion. Debt service costs have surged to their highest point since 2009, amounting to an extra $150 billion in interest payments. The US deficit has surged by over $300 billion, and federal tax receipts have dipped by 8.4% over a 12-month period.
Trillions of dollars in debt are being issued at interest rates exceeding 5%, nearly double the recent lows. Interest expenses are swiftly becoming the largest item in the budget. The question looms: Is the debt ceiling “crisis” genuinely over, or are we on the precipice of a more profound and enduring financial challenge?
A trillion here, a trillion there, and pretty soon you’re talking about real money..........................
It is my view that the holders of massive amounts of debt instruments want to see them function as perpetual bonds, such that whole populations are subjugated to "forever" indebtedness while a small group real rewards, in a reversion to a feudal type of system.
"A perpetual bond, also known colloquially as a perpetual or perp, is a bond with no maturity date, therefore allowing it to be treated as equity, not as debt. Issuers pay coupons on perpetual bonds forever, and they do not have to redeem the principal. Perpetual bond cash flows are, therefore, those of a perpetuity."
"As the name suggests, with perpetual bonds, the agreed-upon period over which interest will be paid, is forever—perpetuity. In this respect, perpetual bonds function similarly to dividend-paying stocks or certain preferred securities. Just as owners of such stock receive dividend payments for the entire time the stock is held, perpetual bond owners receive interest payments, for as long as they hold onto the bond."
An Overview of Perpetual Bonds
It is likely that many nations will simply default on their "debts" and the whole will eventually fall.
Peter St Onge from Heritage has the notion of liquidating the Fed and therefore all its debt instruments, which would go a long way to stopping a small worldwide elite from buying whole nations by lending unsustainable debt and then expecting payment, when the political instrument of "abrogating debt" is always open to a citizenry.
All the money is loaned to each other. Just 5-10 percent of the world hold assets and little debt. We have become a global equivalent of both a pyramid and ponzu scam. We are all playing in it to some degree. It can and may crash.
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