Debt Rattle December 8 2014
- This topic has 3 replies, 3 voices, and was last updated 9 years, 4 months ago by
.
-
Posts
-
Russell Lee Front of livery stable, East Side, New York City Jan 1938 • Japan’s Economy Is Worse Than Feared (WSJ) • Japan’s Recession Deepens as Elec
[See the full post at: Debt Rattle December 8 2014]It did not allow me to edit so I am reposting here.
The total Debt in the world depending what all you count in it, is around 200-235 Trillion. This is the basic amount that is used for fear mongering. Comparing it to GDP it looks high. That would show a high Debt to Ebitda ratio if the world were a corporation.
But focusing on income ignores a very important side of the equation.
Which side you ask? I am glad you asked Raul Numbskull Ilargi.
The question is what is the value of the world Equity? I know this may be foreign concept to you so I will elaborate. The world total assets is the sum of the World Equity (not equity like stocks, but equity like residual value after Debt is paid off) + World Debt. So what is the value of world total assets?
That is incredibly hard to figure out as values for a lot of things simply do not exist or are unknown.
But we do know values of a lot of things. For example World Financial assets (stocks, bonds, money market funds, excluding all derivatives) is close to 300 Trillion, and total world Residential and Commercial Real estate is 250 Trillion or so. There are many, many, other assets which are owned by Governments which do produce revenue (for example roads and bridges which are toll taxed) that are not included in this count. Gold and other precious metals are also excluded. The value of all of those would conservatively be 150 Trillion and probably a lot higher. So total assets would be 700 Trillion. Subtracting out the Debt gives you between 465 and 500 Trillion as world Equity. For a Debt to equity ratio of around 0.4 to -0.5. Now most single companies have rarely gotten into trouble until Debt to equity exceeds 4. So at 1/10th those levels only a retard like you could think that. That is why you and Nicole Foss have repeatedly missed the big picture and got everything wrong. And every now and then when after years of fear mongering something remotely goes your way you have orgasmic debt rattles. Actually I have left out the Net value of all private corps. That data is not easily available but most people believe it is between 1X-2X public corps. So between 300 Trillion to 600 Trillion.
That Means your total world assets are 1.0 to.1.3 Quadrillion giving a debt to equity ratio of around 0.2 to 0.15.
You think these numbers are made up?
How about this? This is actually Statistics Canada’s graph.
https://www.statcan.gc.ca/pub/11-008-x/2011001/c-g/11430/c-g003-eng.htm
Showing Canada’s debt to Assets of 0.2! That would imply a Debt to Equity of 0.25! So fucking scary. That chart actually says that it is at the highest level in 35 years and it is still so incredibly low. I actually pointed this out to you in early 2009 as to the reason stocks would rise big time and you made fun of me. Sorry for being like you.
And BTW the average Return on Assets by companies is around 6-8%. So 1000 trillion producing a world GDP (income of 60-70 Trillion would make perfect sense).Huckleberry said: “…Now most single companies have rarely gotten into trouble until Debt to equity exceeds 4… This is actually Statistics Canada’s graph…Showing Canada’s debt to Assets of 0.2! That would imply a Debt to Equity of 0.25! …so incredibly low.”
That graph with Statistics Canada data is actually from a report titled “Debt and family type in Canada”, and refers to “personal and unincorporated business assets per household.” Apples and oranges?
The related section of this report:
“As well as the day-to-day ability to pay for debts from income, another indicator of financial insecurity is the debt-to-asset ratio. This ratio tracks the degree to which debts are backed by assets. Higher ratios indicate there may be more Canadians who carry debt that is not secured by assets. Although household debt increased between 1990 and 2009, the value of personal and unincorporated business assets per household almost doubled over the same period. As a result, the debt-to-asset ratio remained relatively stable between 1970 and 2007, hovering around 16.7% (Chart 3). However, in 2008 and 2009 the debt-to-asset ratio increased to 19.6%, the highest level in more than 35 years.”https://www.statcan.gc.ca/pub/11-008-x/2011001/article/11430-eng.htm
Huckleberry, what happens to these debt-to-asset ratios when real estate values collapse? How is the demand for a company’s products related to the debt levels of the would-be customers? What happens to “most single companies” when their market dries up (regardless of their debt-to-equity ratios)? What’s the effect on a company’s debt-to-equity ratio (and the effect on the economy) when corporate assets, like production facilities, are suddenly non-productive? In your opinion, what’s the range of debt-to-equity ratios in which companies will “get into trouble” (when real market values are considered), during prolonged periods of no growth?
“Huckleberry, what happens to these debt-to-asset ratios when real estate values collapse? How is the demand for a company’s products related to the debt levels of the would-be customers? What happens to “most single companies” when their market dries up (regardless of their debt-to-equity ratios)? What’s the effect on a company’s debt-to-equity ratio (and the effect on the economy) when corporate assets, like production facilities, are suddenly non-productive? In your opinion, what’s the range of debt-to-equity ratios in which companies will “get into trouble” (when real market values are considered), during prolonged periods of no growth?”
That is an amazing question. First, my apples were given as a corollary to the oranges. Yes they are different but both methods reached almost the same number.
Now you can go back to RIM and Nicole Foss’s BS for the last 7 years and see if they have even pointed out this ratio. All they have done is point out how ludicrously high the debt is, which it is not. In fact if we were not talking about Peak oil/climate change/environmental damage, everyone with one single neuron left would disregard every ounce of bullshit spewed on this blog. But these two do have a second bogeyman. So when “debt is disaster” fails it will be “we do not have enough energy to pay back the debt.”
I still cannot believe the insanity of these two numbnuts proclaiming that a person with a $300,000 home “cannot” pay back his debt of $60,000 because there is not enough “energy”. Because that is the ratio. A debt to Asset of 0.2.I do not believe that peak oil will be the disaster these morons make it out to be. But it will be tough. No question.I do not have all the answers but I do know this mattress stuffing with dollars because a Debt to asset ratio of 0.2 will produce massive deflation is too stupid to not criticize.
- You must be logged in to reply to this topic.
Sorry, the comment form is closed at this time.