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If Debt Was The Problem…
John Rubino: Confounded Interest just posted a nice summary of a McKinsey report on the growth of global debt during what some persist in calling the “great deleveraging.” Turns out that since the crisis of 2008, debt has actually risen by $57 trillion, and the ratio of debt to GDP is up 17 percentage points to 286%. Meanwhile, central banks are monetizing 100% of newly-issued sovereign debt.
The obvious response to this is 1) wow, nothing has been fixed; in fact just the opposite, and 2) these stats, horrendous as they are, are incomplete because they don’t include unfunded liabilities of governments and private pensions, which are just as real as any other kind of debt.
But unfunded liabilities must be getting better, what with the stocks and bonds in pension fund portfolios soaring lately. Right? Since that’s an effortless Google search, that’s what I did. And the results were both counterintuitive and scary.
It seems that even with pension fund investment portfolios booming, obligations to future retirees are rising even faster, making these entities even more underfunded today than in 2007. Here’s a sampling of the headlines just from February, in the order they appear in the search window:
Unfunded liabilities and the investment smokescreen
US teachers state pensions near $500 billion in underfunded liabilities
Teacher pensions: the math adds up to a crisis
Unfunded pension liabilities up for Pittsburgh
Cascade report exposes $26 billion unfunded liabilities
Prescott unfunded pension liability surpasses $70 million
Sacramento’s ‘wall of debt’ grows dangerously high
Absent from this list is the US federal government’s number, though that’s also easy to find. From Forbes: You Think The Deficit Is Bad? Federal Unfunded Liabilities Exceed $127 Trillion. That’s about 6 times the reported federal debt.
Now, easy money advocates argue that the solution to this and all other unbalanced economic equations is to borrow and spend enough new cash to get asset prices up and put people back to work.
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Source: http://marketdailynews.com/2015/02/25/if-debt-was-the-problem/
