Debts 02 - Govt etc (Nov 16 - Dec 24)

Re: Debts 02 - Govt, Margin etc (Nov16 - Dec18)

Postby winston » Thu Feb 15, 2018 5:03 pm

These charts reveal the 'potentially apocalyptic' state of the US budget deficit

by Steven Rattner

By 2027, according to projections by the Committee for a Responsible Federal Budget, the annual deficit will total $2.1 trillion.

As recently as June 2017, the Congressional Budget Office projected that the federal budget deficit would total $689 billion next year — already higher than it should be at this stage of an economic recovery.

Now after passage of the tax cut and the new spending package, the anticipated deficit has shot up to $1.15 trillion.

These deficits will increase the nation's total debt, which is now $20 trillion, and increase it to as much as $35 trillion.

That means that the critically important ratio of debt to the size of the nation's economy will go from about 72% at present to as much as 109%.


Source: Business Insider

http://www.businessinsider.com/budget-d ... 18-2/?IR=T
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Re: Debts 02 - Govt, Margin etc (Nov16 - Dec18)

Postby winston » Sat Feb 17, 2018 7:54 am

What’s the greatest risk to China’s economy? Look no further than its growing corporate and household debt

China has been one of the leading generators of debt since 2009, contributing to the latest worries over global inflation that have roiled markets

China’s pile of debt (28 trillion yuan, or US$4.3 trillion), equivalent to about 41 per cent of gross domestic product as of March 2016, is managed by issuing more debt.

China created a record 2,900 billion yuan in new loans (US$458.3 billion), 900 billion yuan above the projected 2,000 billion yuan. Corporate loans rose to 901.6 billion yuan in January from 329.4 billion yuan in December.


Source: SCMP

http://www.scmp.com/business/global-eco ... urther-its
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Re: Debts 02 - Govt, Margin etc (Nov16 - Dec18)

Postby winston » Sat Feb 17, 2018 3:33 pm

This may be the beginning of the Great Financial Reckoning

Source: SOVEREIGN MAN

http://www.thetradingreport.com/2018/02 ... reckoning/
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Re: Debts 02 - Govt, Margin etc (Nov16 - Dec18)

Postby winston » Wed Feb 21, 2018 6:36 pm

While Washington Spends, China Moves to Cut Its $30 Trillion Debt Load

Beijing's campaign against profligacy has shut down expensive projects and led to talk of painful diets—even bankruptcy—for state-owned enterprises.

So far, the focus has been on excessive lending by shadow banks and acquisitive private conglomerates such as the Dalian Wanda Group and Anbang Insurance Group Co.

Xi’s quest to restrain borrowing by local governments and the nation’s behemoth state-owned enterprises. Last year he called curbing SOE leverage “the priority of priorities” and warned local officials they’d be held accountable “for a lifetime” for building up regional debt.

China’s debt of $30 trillion, roughly 259 percent of GDP, has been powered primarily by massive borrowing by state companies.

State companies command about 40 percent of China’s industrial assets and create almost 20 percent of urban employment.

Domestic deposits of $27 trillion almost equal outstanding debt.


Source: Bloomberg

https://www.bloomberg.com/news/articles ... aretheview
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Re: Debts 02 - Govt, Margin etc (Nov16 - Dec18)

Postby winston » Fri Feb 23, 2018 9:55 am

1 in 5 Americans have more credit-card debt than savings

By Maria LaMagna

Consumers are putting saving on the back burner

Source: Market Watch

https://www.marketwatch.com/story/1-in- ... 2018-02-22
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Re: Debts 02 - Govt, Margin etc (Nov16 - Dec18)

Postby behappyalways » Sun Mar 11, 2018 2:59 pm

On borrowed time

America’s companies have binged on debt; a reckoning looms

The total debt of American non-financial corporations as a percentage of GDP has reached a record high of 73.3%

AMERICA’s companies have been powering ahead for years. Amid growing profits, the recession that began in 2007 seems an increasingly distant memory. Yet the situation has a dark side: companies have binged on debt.

For now, as the good times have coincided with a period of record-low interest rates, markets have been untroubled. But a shock could put corporate America into trouble.

No matter how it is measured, the debt load looks worrying. When calculated as a percentage of GDP, the total debt of America’s non-financial corporations reached 73.3% in the second quarter of 2017 (the latest available data). This is a record high.

Measured against earnings before interest, tax, depreciation and amortisation (EBITDA), the net debt of non-financial companies in the S&P500 hit a ratio of 1.5 at of the end of 2016, a level not seen since 2003. And it remained nearly as high in 2017 (see chart).

To be sure, things are less worrying than they were before the financial crisis. According to a recent analysis by S&P Global Ratings, a ratings agency, for example, debt is now more evenly distributed. Only 27% of American firms in 2017 were highly levered (defined as a debt-to-earnings ratio higher than five), down from 42% of firms in 2007, meaning that fewer firms are immediately at risk.

The use of the extra debt was also somewhat different. Bob Michele of J.P. Morgan reckons that in recent years much of it was used by companies to finance share buy-backs, essentially for purposes of balance-sheet management (rather than, say, big expansions or acquisitions).

Even so, certain industries look particularly vulnerable under their debt loads. David Tesher of S&P Global Ratings says that retail is the sector in America most at risk. Such companies accumulated high levels of debt after more than a decade of private-equity-sponsored activity. They must also cope with tough competition from e-commerce.

Around 50 American retailers filed for bankruptcy in 2017 alone, many due to the debt piled on by their private-equity owners. The most prominent example is Toys R Us, which was acquired by a consortium of private-equity firms in 2005.

In the case of Payless ShoeSource, a retailer that also went bankrupt last year, creditors argued in court filings that its private-equity owners should share the blame for its collapse; after much argument, the owners agreed to put more than $20m back into the company.

Energy and utilities are two other industries at risk from their levels of indebtedness. The net debt-to-EBITDA ratio of the energy industry rose to three times by 2016, largely because of the shale-oil boom. But firms then issued a substantial amount of new equity.

As earnings recovered with the rise in oil prices, their debt ratio improved to two times by last year. Utilities, meanwhile, which have always borrowed heavily, saw their debt rise to a 14-year high of 4.5 times earnings in 2017.

America’s new tax reforms add extra complications. Despite being welcomed by most businesses, the impact on firms’ willingness and ability to take on debt is uneven. For many, the lowering of the headline corporate-tax rate from 35% to 21%, as well as provisions such as the ability to expense capital spending up front, will boost profits and thus reduce the need to take on new debt (unless bosses go on a buying spree).

But the new law also caps the (previously unlimited) tax deductibility of interest payments at 30% of EBITDA until 2021, falling to a more restrictive 30% of earnings before interest and taxes (but after depreciation and amortisation) from 2022. This provision will hit the most indebted firms hard, notably those owned by private equity, as well as industries such as utilities.

How quickly debt levels turn into a problem depends on monetary policy and how the economy fares. In a benign scenario, in which corporate earnings rise across the board, and the Federal Reserve raises interest rates at a slow and predictable pace, companies’ debt ratios may even fall, for now.

But if more worrying scenarios—say, a trade war, or significantly faster-than-expected monetary tightening—come to pass, more indebted companies may find their luck running out. A binge, after all, never lasts forever.

Source: The Economist
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Re: Debts 02 - Govt, Margin etc (Nov16 - Dec18)

Postby winston » Thu Mar 15, 2018 8:25 am

China: ‘One leak and we’ll all drown’: top Chinese lawmaker raises alarm over river of local government debt

NPC Standing Committee member says liabilities have been hidden and vastly underestimated

Beijing’s official figures for local government debt – 16.5 trillion yuan (US$2.6 trillion) overall as of the end of last year – could be underestimates, with many government liabilities disguised as corporate debt.

Internal government assessments put the size of “hidden and disguised” local government debt at “at least 20 trillion”, making China’s official figure less than half of the real total.

The country’s debt problem was excessive printing of money in the past decade, with the amount in circulation quadrupling between 2007 to 2017 to 168 trillion yuan, or over 200 per cent of China’s nominal GDP.



Source: SCMP

http://www.scmp.com/news/china/economy/ ... ises-alarm
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Re: Debts 02 - Govt, Margin etc (Nov16 - Dec18)

Postby winston » Wed Apr 11, 2018 7:55 am

US government says its budget deficit will PERMANENTLY exceed $1 trillion

by Simon Black

According to the CBO, the federal government’s spending habits are in such dire straits that its total budget deficit will exceed $1 trillion by 2020. That’s just two years away.

The national debt already exceeds $21 trillion, more than the size of the entire US economy.

Consider that over the last 12 months, the US national debt grew by 6.4%. Over the same period, the US economy grew by 2.9%... less than HALF the rate of growth of the national debt

Even if you include the ‘beneficial’ effects of inflation to the US economy, economic growth peaked at around 4.4%… still well below the rate of debt growth.

It doesn’t take a rocket scientist to see that this mismatch is a recipe for disaster.

For fiscal year 2017, the government spent a record $458 billion on interest… nearly half a trillion. That’s about 30% higher than they spent on interest in 2012, and 13% higher than in 2015.

Source: Sovereign Man

https://www.sovereignman.com/trends/us- ... et_deficit
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Re: Debts 02 - Govt, Margin etc (Nov16 - Dec18)

Postby winston » Sat Apr 21, 2018 10:56 am

Chinese local governments’ US$2.4 billion of concealed debts is uncovered by audit office

Hidden debts were racked up by borrowing through financing vehicles and deals forbidden by the finance ministry, report says

The annual growth of LGFV debts had slowed from 20 per cent to 10 per cent, by rolling over old debt with new borrowings.

China’s outstanding local government debt at the end of March was about 16.6 trillion yuan (US$2.6 trillion), up 0.8 per cent from the end of 2017 but still within the ceiling of 20.9 trillion yuan (US$3.3 trillion) approved by the National People’s Congress.

During the first quarter of this year, local governments borrowed a total of 219.5 billion yuan (US$35 billion) in bonds, all of which was used to roll over old debts.


Source: SCMP

http://www.scmp.com/news/china/economy/ ... s-revealed
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Re: Debts 02 - Govt, Margin etc (Nov16 - Dec18)

Postby winston » Thu May 10, 2018 2:31 pm

Pension Casualty

General Electric has a pension fund that’s underfunded by a whopping $31 billion.

Bloomberg reported last summer that the biggest corporations in the United States collectively have a $382 billion pension shortfall.

Not to worry, though. The federal government long ago set up an agency called the Pension Benefit Guarantee Corporation to bail out insolvent pension funds.

(It’s sort of like an FDIC for pension funds.)

Problem is-- the Pension Benefit Guarantee Corporation is itself insolvent and in need of a bailout.

According to the PBGC’s own financial statements, they have a “net financial position” of MINUS $75 billion, and they lost $1.3 billion last year alone.

The federal government isn’t really in a position to help; according to the Treasury Department’s financial statements, Social Security and Medicare have a combined shortfall exceeding $40 TRILLION.

And public pension funds across the 50 states have an estimated combined shortfall of $1.4 TRILLION, according to a 2016 report by the Pew Charitable Trusts.

Source: Sovereign Man
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