Global Debt Hits Record $233 Trillion (US Taxpayers On Hook For $921K In Unfunded Liabilities)

(Bloomberg) Global debt rose to a record $233 trillion in the third quarter of 2017, more than $16 trillion higher from end-2016, according to an analysis by the Institute of International Finance. Private non-financial sector debt hit all-time highs in Canada, France, Hong Kong, South Korea, Switzerland and Turkey.

At the same time, though, the ratio of debt-to-gross domestic product fell for the fourth consecutive quarter as economic growth accelerated. The ratio is now around 318 percent, 3 percentage points below a high set in the third quarter of 2016, according to the IIF.
“A combination of factors including synchronized above-potential global growth, rising inflation (China, Turkey), and efforts to prevent a destabilizing build-up of debt (China, Canada) have all contributed to the decline,” IIF analysts wrote in a note.
The United Nations calculates the global population is 7.6 billion, suggesting the world’s per capita debt is more than $30,000.

The debt pile could end up acting as a brake on central banks trying to raise interest rates, given worries about the debt servicing capacity of highly indebted firms and government, the IIF analysts wrote.

No guff, Chet!

Here is the debt picture in the US since The Fed’s ZIRP (or NIRP) was put in place. The US debt now stands at over $20.5 TRILLION while household debt has risen to over $15 TRILLION as of 2016. Yes, The Fed NIRP have enable the US government AND households to gorge on debt. Problem? Our children and grandchildren are on the hook for this debt.


But even if you think that $20.6 TRILLION in public debt is outlandish, look at the US unfunded liabilities that politicians have racked up: $111.5 TRILLION, almost 6 TIMES the public debt!! That is $921 thousand per taxpayer (on top of  the $170 thousand in liability per taxpayer in public debt).


US politicians blithly keep promosing more ‘free things’ and borrow even more money to pay for them.  The US is already at over $1 million in taxpayer liabilities for unfunded liabilities and public debt.

College students should be concerned about politians borrowing and promising trillions of dollar and stick the burden on them for repayment. But they are generally apathetic about their impending demise. Not to mention their likely unfunded pensions.


2017 Ends On A High Note: NY Fed NOWCAST Has Q4 GDP At 3.87% (Dow Up 38% Since Nov 4 ’16 Despite 4 Fed Rate Increases)

Well, some good economic news on the US front. The New York Fed’s NOWCAST GDP forecast model has Q4 GDP at … 3.87%.


The Dow Jones Industrial Average (DJIA) is up 38% since November 4, 2016 despite 4 rates increases from The Fed.


I don’t think that The Fed should include more cowbell.

Hysertianomics: S&P 500 Index UP 25% Since Trump Election As Fed Keeps Raising Rates (Krugman Said Markets Would Never Recover)

Nobel Laureate Economist Paul Krugman said on November 8, 2016 that markets will never recover from the stock market decline that occurred on November 7th, the day before the Presidential election.


Never recover? The S&P 500 price index is UP 25.2% since November 8th (election day). While the Russell 2000 small cap index is up 29.2%. All this inspite of The Federal Reserve deciding to raise their target rate FOUR TIMES after the election (compared with only once increase during the 8 years of Obama).


Meanwhile, stock market volatility has almost been cut in half since Trump’s election.


Krugman made be right … eventually.  But as of the day after Christmas 2017, he sounds like a Hysterianomics Professor. Or on the Crazy Train with The Federal Reserve driving.


Chicago, The Puerto Rico Of The Plains, Goes The “Bowie Bond” Route (Selling Off Rights To Receive Sales-tax Revenue)

Chicago is truly “the Puerto Rico of The Plains.” Deep, deep in debt (declining population, rising expenditures).


In a frantic move to raise their bond rating, Chicago is doing what the late David Bowie did back in 1997: he securitized current and future royalties from recordings (Bowie Bonds had an interest rate of 7.9% and a life of 10 years. The Bowie bonds were purchased by Prudential Insurance for $55 million). So now Chicago is sellling off their sales-tax revenues.

(Bloomberg) -By Martin Z. Braun- Chicago’s public pension debt is $36 billion and growing, it’s facing $550 million in budget deficits over the next three years and this summer the state had to bail out a school system that was flirting with insolvency.

Yet next month, the nation’s third-largest city — whose bonds were downgraded to junk by Moody’s Investors Service two years ago — will start selling as much as $3 billion of debt that another rating company considers as safe as U.S. Treasuries.

That’s because Chicago is selling off its right to receive sales-tax revenue from Illinois to a separate public corporation, which will issue new bonds backed by those funds, a structure called securitization. Because bondholders will be insulated from the city’s finances and have a legal claim to the sales-tax money, Fitch Ratings deems the bonds AAA.

But Chicago’s sale comes as many cities face pressure from deeply underfunded pensions and opting for bankruptcy has lost some of its taint after a handful of governments did so after last decade’s recession, though Illinois municipalities aren’t allowed to take that step.
Chicago was extended the power to securitize its sales-tax payment by Illinois lawmakers this year. Paying off higher cost debt by issuing the new bonds will save Chicago almost $100 million in 2018.

Chicago’s new bondholders will have a first claim to more than 90 percent of the approximately $715 million of sales-tax revenue collected each year, according to a presentation to Chicago’s aldermen. The state, which collects sales taxes, will send the revenue directly to the bond trustee. Any excess revenue will go to the city. 

NEW YORK–(BUSINESS WIRE)–Kroll Bond Rating Agency (KBRA) has assigned an AAA long-term rating to Chicago’s Sales Tax Securitization Corporation’s Sales Tax Securitization Bonds Series 2017 A and Taxable Series 2017B.

Here is S&P’s summary.

Yes, there is a whole lot of municipal taxation in Chicago.


Chicago is now the David Bowie of cities, in addition to being The Puerto Rico of The Plains.


US Treasury 10Y-2Y Slope Drops To Near 10 Year Lows (Ahead Of Fed FOMC Meeting)

It is doubtful that we will learn much from today’s Open Market Committee (FOMC). Hopefully we will get additional clarity on the Fed Balance Sheet unwind schedule (it was supposed to start in October and it is now November).

Ahead of the meeting, both the 10Y-2Y and 30Y-5Y Treasury slopes fell to near 10 year lows.

And the 10 year Treasury Note volatility index, TYVIX, remains near historical lows.

And just a reminder, core PCE prices YoY (“inflation”) is at 1.33%, well below the 2% Fed target rate for inflation.

Well, apparently Janet Yellen and The FOMC aren’t following the Taylor Rule (or ANY  rule that I can detect).

I am sure that Janet Yellen would like to lock up John Taylor (in gold) and throw away the key.

Spending Bubble? Federal Government Spends 3x Tax Receipts

While some are preoccupied (like me) with how the next Federal Reserve Chair is going return to monetary normality (and unwinded the $4.4 trillion balance sheet), others (like me) worry about the unsustainability of US Federal spending. Particulalry how much politicians have promised Americans in terms of entitlements.

Here is a chart showing Government total expenditures (red line) along with their source of taxes (personal in green and corporate in purple). The total Federal current tax receipts is in blue. As of Q2 2017, total expenditures exceed current tax receipts (personal and corporate) by 3 times (or 3x).

With M2 Money Velocity at a historic low, printing more money isn’t doing the trick.

And with unfunded liabilities (GAAP) at $108.7 TRILLION (around $900,000 per taxpayer), the Federal government has a spending problem.

Yes, mandatory (entitlements such as Social Security, Medicare and Medicaid) going hyperbolic, discretionary spending is being crowded out and is predicted to decline.

When we included the grossly underfunded public pensions, the big scarcity in the near future is where governments are going to come up with all the money thay have promised.

Yes, Congress is “over the line.” And has been for some time.

If Jeffrey Lebowski running Congress??

S&P 500 And Margin Accounts Near All-time High (Will Fed Rock the Boat??)

The S&P 500 stock market index is near an all-time high. But then again, margin accounts at NYSE firms are also at all-time highs.


Meanwhile, brokerage call money loan rates on margin accounts continue near the all-time low (despite recent increases in The Fed Fund Target rate).


Will The Fed’s proposed 25 basis point increase at the December FOMC meeting (which would result in the call money rate rising to 3.25%) result in a slowdown of margin borrowing? Probably not.

Party on Stan, Party on Janet!