Bola de nieve

La crisis global de la deuda se extiende por el mundo como una mancha de aceite. La bola de nieve sigue rodando, esta vez con un poquito más de velocidad. No es solo Grecia. Los valores nominales de lo que se debe, entre las grandes economías, alcanza niveles grotescos. Ya nadie cree que vayan a pagar. Mientras tanto, multitud de países pequeños van acumulando crisis tras crisis. Astroboy se pregunta: ¿qué pasaría si un líder global, un referente moral, un Papa Francisco, digamos, comenzara a gritar a los cuatro vientos desde los ventanales vaticanos: “La deuda NO se paga”?

Leemos primero en el Guardian de hoy:

Título: Beyond Greece, the world is filled with debt crises

Epígrafe: Drama in Athens reflects a bigger truth: precarious countries across the globe owe trillions of dollars to lenders and investors who must be repaid

Texto: With its shuttered banks, furious public protests and iconoclastic politicians, the plight of Greece, brought to its knees by a crippling debt burden, has been gripping and heartbreaking in equal measure: a full-blown sovereign debt crisis on the doorstep of some of the wealthiest countries in the world.

Yet new analysis by the Jubilee Debt Campaign reveals that Greece’s plight is far from unique: more than 20 other countries are also wrestling with their own debt crises. Many more, from Senegal to Laos, lie in a debt danger zone, where an economic downturn or a sudden jump in interest rates on world debt markets could lead to disaster.

One of the lessons from the 2008 crash was that hefty debt levels can leave countries vulnerable to sudden shifts in market mood. But Jubilee reports that the rock-bottom interest rates across major economies, which have been a key response to the crisis, have in many cases prompted governments, firms and consumers to go on a fresh borrowing binge, storing up potential problems for the future.

Judith Tyson of the Overseas Development Institute thinktank says the flipside of the latest round of borrowing has been investors and lenders in the west looking for bigger returns than they could get at home, a process known in the markets as a “search for yield”.

“Since 2012, there’s been a huge increase in sovereign debt, in Africa in particular,” she says. Some of the countries involved were beneficiaries of the debt relief programme that G8 leaders signed up to at the Gleneagles summit in 2005. “They were given debt relief with the idea that it would give a clean slate to go forward,” Tyson says.

She warns that a number of countries have since “loaded up” on debt – and while some governments had invested the money wisely, diversifying their economies and improving infrastructure, others have not. She points to Ghana, in west Africa, where a sharp increase in borrowing has been spent on what she calls “pork-barrel politics. They’ve spent it in a frivolous way.”

Jubilee’s analysis defines countries as at high risk of a government debt crisis if they have net debt higher than 30% of GDP, a current-account deficit of over 5% of GDP and future debt repayments worth more than 10% of government revenue. “We estimate that 14 countries are rapidly heading towards new government debt crises, based on their large external debts, large and persistent current account deficits, and high projected future government debt payments,” it says.

One vulnerable example is Tanzania, a country that suffered a severe debt crisis in the 1990s. In many ways, it has been a success story since receiving international debt relief in 2001 and 2006, allowing repayments to fall from 27% of government revenue to 2%. Child mortality has dropped; fees for primary schools have been abolished; more children are completing their schooling.

Yet borrowing has steadily risen since 2009, including from multilateral donors such as the World Bank, which tend to offer aid in the form of cheap loans rather than handouts. It’s a measure of success in some ways that the country managed to raise money from private investors in the capital markets by issuing bonds.

But Tanzania’s economic growth, and government revenues, are heavily dependent on exports of gold and precious metal ores, which have fallen in price in recent months. Jubilee’s numbers show that slower than expected growth could see debt repayments shoot up from an expected 10% of government revenue in 2018 to double that – well into the danger zone.

Falling commodity prices as growth in China slows, as well as the strong dollar – a danger because much of African governments’ borrowing is dollar-denominated – will create pressures on many other developing countries.

Ethiopia, where ministers from around the world will gather this week to discuss how to fund the next wave of international development, is another country whose debt levels have been steadily rising, and which could prove vulnerable. Mongolia, which has welcomed foreign investment to exploit its huge natural resources, including coal, has plans to borrow $1bn over the next year; but with its currency, the tugrik, declining sharply, it could be hit hard if the economic boom of recent years comes to an end.

“Current levels of lending to impoverished countries threaten to recreate debt crises,” warns Jubilee’s policy officer Tim Jones.

But it’s not just in the developing world where low interest rates and the legacy of the crisis have increased the temptation to paper over the cracks with borrowed money. Jubilee found that net cross-border lending worldwide, including the private sector as well as governments, has increased from $11.3 trillion in 2011 to $13.8tn in 2014 – and forecasts that it will reach $14.7tn this year.

That’s a 30% rise in just four years and a sign that the “global imbalances” many experts saw as a key cause of the crisis are far from resolved. “The world is still very out of kilter,” says Russell Jones, economist at Llewellyn Consulting.

The lacklustre global recovery has also been a factor in driving up debt levels as policymakers seek to restore pre-crisis living standards.

“All this debt is probably being accumulated because other sources of growth are increasingly in decline,” says Russell Jones. “There’s a lot of pressure on governments and central banks to keep things going at the old rate.”

As Greece’s government found, debts that seem manageable one day can quickly become unsustainable the next if conditions in financial markets or the economy abruptly shift.

Northern Rock, Britain’s bailed-out mortgage bank, made the same discovery in August 2007 when, as its then boss Adam Applegarth put it, “the world changed”. Many experts believe that if, as expected, the US Federal Reserve starts to increase interest rates from their record low later this year, that could act as the catalyst for a shake-up in global debt markets that could have far-reaching consequences.

Tyson points out that many loans taken out by African governments in recent years carry fixed interest rates for five years. When they come to be refinanced, it may have to be at much higher rates. As US rates increase, she says, investors will be keen to pull their money out of smaller emerging economies: “We will see a sharp reversal of capital flows. Some of these countries are quite fragile.”

In its twice-yearly report on the global economy last month, the World Bank warned that developing countries facing up to the prospect of the flood of cheap money being turned off should be “hoping for the best, preparing for the worst”.

Russell Jones says: “When the Fed has a very itchy trigger finger, you have the potential for some fairly serious issues.”

Countries at high risk of government external debt crisis

- Bhutan

- Cape Verde

- Dominica

- Ethiopia

- Ghana

- Laos

- Mauritania

- Mongolia

- Mozambique

- Samoa

- Sao Tome e Principe

- Senegal

- Tanzania

- Uganda

Countries currently in government external debt crisis

- Armenia

- Belize

- Costa Rica

- Croatia

- Cyprus

- Dominican Republic

- El Salvador

- The Gambia

- Greece

- Grenada

- Ireland

- Jamaica

- Lebanon

- Macedonia

- Marshall Islands

- Montenegro

- Portugal

- Spain

- Sri Lanka

- St Vincent and the Grenadines

- Tunisia

- Ukraine

- Sudan

- Zimbabwe

***

Después de repasar la lista de arriba, zero Hedge se pregunta:

“So what should be done about this?

Should we have the “wealthy” countries bail all of them out?

Well, the truth is that the “wealthy” countries are some of the biggest debt offenders of all.  Just consider the United States.  Our national debt has more than doubled since 2007, and at this point it has gotten so large that it is mathematically impossible to pay it off.

Europe is in similar shape.  Members of the eurozone are trying to cobble together a “bailout package” for Greece, but the truth is that most of them will soon need bailouts too…

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%.

In addition to Spain, Italy and France, let us not forget Belgium (106 percent debt to GDP), Ireland (109 debt to GDP) and Portugal (130 debt to GDP).

Once all of these dominoes start falling, the consequences for our massively overleveraged global financial system will be absolutely catastrophic…

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%.

Things in Asia look quite ominous as well.

According to Bloomberg, debt levels in China have risen to levels never recorded before…

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 record 207 percent of gross domestic product at the end of June, up from 125 percent in 2008, data compiled by Bloomberg show.

And remember, that doesn’t even include government debt.  When you throw all forms of debt into the mix, the overall debt to GDP number for China is rapidly approaching 300 percent.

In Japan, things are even worse.  The government debt to GDP ratio in Japan is now up to an astounding 230 percent.  That number has gotten so high that it is hard to believe that it could possibly be true.  At some point an implosion is coming in Japan which is going to shock the world.

Of course the same thing could be said about the entire planet.  Yes, national governments and central banks have been attempting to kick the can down the road for as long as possible, but everyone knows that this is not going to end well.

And when things do really start falling apart, it will be unlike anything that we have ever seen before.  Just consider what Egon von Greyerz recently told King World News…

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.

So what do you think is coming, and how bad will things ultimately get once this global debt crisis finally spins totally out of control?