$100 Trillion in Debt

I was dreaming when I wrote this
So sue me if I go too fast
But life is just a party
And parties weren't meant to last
--Prince

Bloomberg reports that global debt exceeds $100 trillion and is up more than 40% since the first signs of the credit crisis in 2007.

This number under-reports total credit obligations, as it does not consider unfunded liabilities (e.g., future entitlements) or derivatives.

The key graph is the one on the left. Government debt comprises about half the total and has nearly tripled in size since 2001. This is largely the consequence of interest rate suppression by central banks that has enabled governments to borrow at ultra low rates.

An important takeaway is that credit did not 'collapse' during the crisis. Debt grew--an inflationary thing.

What has been occuring is shifting of credit risk. Less on private balance sheets and more on public balance sheets.

This is not austerity. By definition, austerity means living below one's means by borrowing less, paying down debt, and saving more.

What we have is profligacy.