All of those countries will come knocking asking for help at some point. The fact is that their Debt to GDP levels have soared since the EU nearly collapsed in 2012.Spain’s Debt to GDP has risen from 69% to 98%. Italy’s Debt to GDP has risen from 116% to 132%. France’s has risen from 85% to 95%.
Spain has over $1.0 trillion in debt outstanding… and Italy has €2.6 trillion. These bonds are backstopping tens of trillions of Euros’ worth of derivatives trades. A haircut or debt forgiveness for them would trigger systemic failure in Europe.EU banks as a whole are leveraged at 26-to-1. At these leverage levels, even a 4% drop in asset prices wipes out ALL of your capital. And any haircut of Greek, Spanish, Italian and French debt would be a lot more than 4%.
While China’s economic expansion beat analysts’ forecasts in the second quarter, the country’s debt levels increased at an even faster pace.Outstanding loans for companies and households stood at a record207 percent of gross domestic product at the end of June, up from125 percent in 2008, data compiled by Bloomberg show.
Eric, there are now more problem areas in the world, rather than stable situations. No major nation in the West can repay its debts. The same is true for Japan and most of the emerging markets. Europe is a failed experiment for socialism and deficit spending. China is a massive bubble, in terms of its stock markets, property markets and shadow banking system. Japan is also a basket case and the U.S. is the most indebted country in the world and has lived above its means for over 50 years.So we will see twin $200 trillion debt and $1.5 quadrillion derivatives implosions. That will lead to the most historic wealth destruction ever in global stock, with bond and property markets declining at least 75 – 95 percent. World trade will also contract dramatically and we will see massive hardship across the globe.