From a practical perspective, operating leases are pretty much the same as debt. They reflect a contractual obligation on the part of one counterparty to make defined stream of cash payments to another over a set period and with an implied interest rate embedded in the payment stream. In fact, within a bankruptcy context operating leases are treated exactly the same as debt and rank pari passu with the other general unsecured obligations of a business. That said, accounting rules treat operating leases differently than debt and do not require them to be included as a liability on a company’s balance sheet. That is, until 2019.
As Bloomberg points out this morning, starting in 2019 new accounting rules, called IFRS 16, will force companies to include operating lease commitments as part of their reported debt obligations. And while the end result will have far-reaching implications, the biggest will be the addition of roughly $3 trillion in debt to corporate balance sheets.
We always knew that this would start happening. Earlier this month, I wrote about the severe economic problems that are plaguing South America, but up to this point I have neglected to discuss the horrific famines that are breaking out all over Africa. Right now there is a desperate need for food in South Sudan, Somalia, northeast Nigeria, Eritrea and Kenya. And Yemen, even though it is not technically part of Africa, is being affected by many of the same factors that are crippling nations all over eastern Africa. The United Nations says that more than 20 million people could die from starvation and disease if nothing is done. When I write about economic collapse, this is the kind of thing that I am talking about, and we are starting to see alarming conditions spread across the globe. Many believe that we could never possibly face this kind of food crisis in the western world, but unfortunately wishful thinking will only get you so far. Continue reading »
According to the International Monetary Fund, global debt has grown to a staggering grand total of 152 trillion dollars. Other estimates put that figure closer to 200 trillion dollars, but for the purposes of this article let’s use the more conservative number. If you take 152 trillion dollars and divide it by the seven billion people living on the planet, you get $21,714, which would be the share of that debt for every man, woman and child in the world if it was divided up equally.
So if you have a family of four, your family’s share of the global debt load would be $86,856. Continue reading »
Silver and gold was slammed today. Initial jobless claims is at its lowest point in 44 years. BCBG filed bankruptcy. The art bubble is popping. CalPers threatens to slash pension benefits. Trump sent a message to every American that the economy is collapsing. Rickards, Stockman say Trump will not be able to avoid the debt bomb that is ready to go off. The Fed has set the stage to bring down the economy. BofA has analyzed the market and makes a prediction that the economy will collapse in the second half of this year.
H/t reader squodgy.
‘The Great Economic Collapse’ coming to a country near you, …
… as planned by …
And it will happen exactly, when these bastards press this button …
“I think what people are missing is this date, March 15th 2017. That’s the day that this debt ceiling holiday that Obama and Boehner put together right before the last election in October of 2015. That holiday expires. The debt ceiling will freeze in at $20 trillion. It will then be law. It will be a hard stop. The Treasury will have roughly $200 billion in cash. We are burning cash at a $75 billion a month rate. By summer, they will be out of cash. Then we will be in the mother of all debt ceiling crises. Everything will grind to a halt. I think we will have a government shutdown. There will not be Obama Care repeal and replace. There will be no tax cut. There will be no infrastructure stimulus. There will be just one giant fiscal bloodbath over a debt ceiling that has to be increased and no one wants to vote for.”
“There must not be a bail-in,” said Germany’s deputy finance minister, Jens Spahn said quoted by Reuters, adding that “we think it is very, very likely that we will come to an agreement with the International Monetary Fund that does not require a haircut.”
This year, 2017, is the beginning of the Sovereign Debt Crisis. While Greece is popping up on the financial radar, the Euro rescue in Portugal has also completely failed to reverse the trend of the country. There has been no effective relief from the debt crisis in Southern Europe. The debt in Portugal is also once again as high as before the crisis of 2010. The 78 billion euros of the European taxpayers money did nothing to reverse the economic trend, but in fact the funds simply went to save the banks.
ATHENS, Greece (AP) — Nothing is inevitable in financial markets — except perhaps the return of Greece as a source of concern. More than seven years since Greece’s sky-high debts first unnerved investors and stoked speculation of the end of the euro currency, the country is back in the spotlight for the same reasons.
The Department of Education recently released a memo admitting that repayment rates on student loans have been grossly exaggerated. Data from 99.8% of schools across the country has been manipulated to cover up growing problems with the $1.3 trillion in outstanding student loans. New calculations show that more than half of all borrowers from 1,000 different institutions have defaulted on or not paid back a single dollar of their loans over the last seven years. Continue reading »
It may – or may not – shock readers to learn that Greece is once again on the verge of collapse.
10-year bond yields shot up and stocks tumbled on Friday, a day after euro zone finance ministers acknowledged the country’s fiscal progress but once again failed to break an impasse with the IMF over the country’s future bailout targets. Early on Friday morning, the greatest Greek nemesis alive, and surely in the afterlife, German Finance Minister Wolfgang Schaeuble said that Greece’s creditors won’t unlock further financial aid to the country unless the government meets its reform promises, which he said it hasn’t done yet. Continue reading »
While most of the country has been focused on the inauguration of Donald Trump, a very real crisis has been brewing behind the scenes. Foreigners are dumping U.S. debt at a faster rate than we have ever seen before, and U.S. Treasury yields have been rising. This is potentially a massive problem, because our entire debt-fueled standard of living is dependent on foreigners lending us gigantic mountains of money at ultra-low interest rates. If the average rate of interest on U.S. government debt just got back to 5 percent, which would still be below the long-term average, we would be paying out about a trillion dollars a year just in interest on the national debt. If foreigners keep dumping our debt and if Treasury yields keep climbing, a major financial implosion of historic proportions is absolutely guaranteed within the next four years. Continue reading »
While Venezuela CDS suggest the country’s default odds remain well over 90%, and its currency on the black market continues to plunge into the abyss of hyperinflation, something odd happened today: Venezuela’s government issued $5 billion in dollar debt for the first time in more than five years, selling bonds in an opaque transaction to the state bank Banco de Venezuela SA and the central bank, Reuters and Bloomberg report. What makes this “unorthodox operation” particularly strange, is that the government is effectively selling debt, and raising dollar funds from itself – it owns both the Banco de Venezuela and the central bank; it is also strange in that the transaction, according to Reuters, does not immediately bring in new funds for the cash-strapped OPEC nation. Continue reading »
Courtesy of record low rates throughout most of 2016, overall debt issuance in the year rose to just over $6.6 trillion, breaking the previous annual record set in 2006. Corporations accounted for more than half of the $6.6 trillion, while the rest included sovereign bonds sold through syndication, US and international agencies, mortgage-backed securities and covered bonds.
As global markets bask in the glow of the Trumpflation recovery, the ECB continues to be busy providing the actual levitating power behind what DB recently dubbed global “helicopter money“, and as of the latest update, the central bank added a total of €21 billion in assets, bringing the total to €3.631 trillion, an amount equal to almost 35% of the entire Eurozone GDP.
One day after China’s regulator halted trading in bond futures for the first time ever, Beijing suffered another catalytic bond-market event overnight when it failed to sell all the Treasury Bills on auction Friday, for the first time in almost 18 months, as bids fell short of minimum requirements, according to traders required to bid at the auction.
As BBG reported overnight, the Ministry of Finance sold only 9.57 billion yuan ($1.38 billion) of 182-day bills in a planned 10 billion yuan sale, and 10.85 billion yuan of 91-day notes in a planned 12 billion yuan sale, according to a statement from the bond clearing house. What is notable, is that the Bills on offer paid a hefty yield: the 182-day bills sold for 2.9565%, while the 91-day bills sold for 2.8991%. Continue reading »
It is official: Trump or no Trump, foreign central banks, wealth funds, and virtually every other official institution in possession of US paper is liquidating their Treasury holdings at a record pace, amounting to an unprecedented $400 billion in the past 12 months.
Barack Obama is one of the biggest “Keynesians” of all time, but unfortunately most Americans don’t even understand what that means. In this article, I am going to share with you the primary reason why Barack Obama has been able to prop up the U.S. economy over the past eight years. If Barack Obama had not taken the extreme measures that he did, we would be in the midst of a historic economic depression right now. But by propping things up in the short-term, he has absolutely demolished our long-term economic future. But like most politicians, Obama has been willing to sacrifice the future for short-term political gain. Continue reading »
Less than two months after Ray Dalio warned about a potential wipe out in the bond market, he has been proven right: the November surge in global yields has resulted in the worst monthly loss in the Bloomberg Barclays Global Aggregate Total Return Index, which lost 4% in November, a record drop, and equivalent to $.17 trillion in losses. The index’s market value fell $2.8 trillion over past two months.
Barely having confirmed he will be Donald Trump’s nominee for Treasury Secretary, Steven Mnuchin proceeded to roil the bond market when the former Goldman banker told CNBC he would look at extending the maturity of future Treasury issuance, hinting at 50 and 100 Year bonds, which promptly sent long-term US bond yields surging by the most since the turmoil following Trump’s election victory.
The Credit Bubble Peak was Marked by “Totally Crazy Lending.”
Debt is good. More debt is better. Funding consumer spending with debt is even better – that’s what economists have been preaching – because the consumed goods and services are gone after having been added to GDP, while the debt, which GDP ignores, remains until it is paid off with future earnings, or until it blows up.
Corporations too have gone on a borrowing binge. Unlike consumers, they have no intention of paying off their debts. They issue new debt and use the proceeds to pay off maturing debts. Funding share-buybacks and dividends with debt is ideal. It’s called “unlocking value.”
Debt must always grow. For that purpose, the Fed has manipulated interest rates to rock bottom. Actually paying off and reducing debt has the dreadful moniker, bandied about during the Financial Crisis, “deleveraging.” It’s synonymous with “The End of the World.” Continue reading »
“When a country embarks on deficit financing (Bush- & especially Obamanomics) and inflationism (Quantitative easing) you wipe out the middle class and wealth is transferred from the middle class and the poor to the rich.” – Ron Paul
“Deficits mean future tax increases, pure and simple. Deficit spending should be viewed as a tax on future generations, and politicians who create deficits should be exposed as tax hikers.” – Ron Paul
Obama knew what he was doing, …
“Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren,” Obama said in a 2006 floor speech that preceded a Senate vote to extend the debt limit. “America has a debt problem and a failure of leadership.” -Barack Obama
More than eight million low-income and single-parent families will face sharp tax increases under Donald Trump exacerbating income inequality, experts warn
President Donald Trump is set to give America’s richest 1% an average annual tax cut of $214,000 when he takes office, while more than eight million families with children are expected to suffer financially under his proposed tax plan.
On the eve of the election, Trump promised to “massively cut taxes for the middle class, the forgotten people, the forgotten men and women of this country, who built our country”. But independent expert analyses of Trump’s tax plan show that America’s millionaire and billionaire class will win big at the expense of struggling low- and middle-income people, who turned out in large numbers to help the real estate billionaire win the election.
Experts warn that Trump’s tax plan will exacerbate America’s already chronic income inequality and herald in a “new era of dynastic wealth”. Continue reading »
“This is the first Chancellor to admit the country is in a terrible mess. Strange how the MSM let it fly under their radar. It isn’t just in a terrible mess, it is TOTALLY BANKRUPT, INSOLVENT and WORTHLESS.
Under Thatcher on instructions from the ‘elite’, the UK diversity was crushed, manufacturing decimated, agriculture ‘monocultured’, and national assets disposed of to foreign conglomerates. At that time North Sea Oil was carrying UK.
Now, no oil, no manufacturing, no agriculture. Just a greedy and corrupt Financial sector currently in a death spiral thanks to bad investment gambling when a slump was clearly on the horizon.
Fucking incompetence, bad management & treason.”
High treason, indeed.
At least they have applied the “best” policies to “jumpstart the (now almost non-existent) economy” …
UK finance minister Philip Hammond has warned that high debt has tied the government’s hands, in a time when the country needs a “watertight” economy to cope with years of “uncertainty” that lie ahead.
In an interview with the BBC on Sunday, Hammond said the country’s first budget plan since the vote to leave the European Union (EU) in July was constrained by “eye-wateringly” high debt and had to be carefully planned to minimize possible damages by Brexit.
“Over the next couple of years we are going to face some uncertainty over the economy,” he said, pointing to the difficult negotiations with the EU that, according to Prime Minister Theresa May, would take at least two years to complete.
Britain’s public debt hovers around £1.6 trillion, which equals 84 percent of the country’s economic output last year and is the highest over the past 50 years. Continue reading »
The “great hope” that has lifted asset prices and inflation expectations over the past week, sent the Dow Jones and the Russell to all time highs, unleashed the highest US Dollar in 13 years and muted pundits who warned of a Trump-induced market crash is that the new president will soon unleash a “Reaganesque” fiscal stimulus, one which will unanchor inflation from recent stubbornly low levels, and succeed where the Fed and other central banks have failed since 2009. Adding to this speculation was Wednesday’s report that the Trump administration is even considering creating an “infrastructure bank” despite nixing the idea previously.
However, as we noted yesterday, there is one major difference between the days of Reagan and modern America: citing the Bond Vigilantes blog we noted that “when Reagan came into power, debt to GDP was just 30%. It is nearly 100% now, as such Reagan had much more fiscal headroom than Trump does today.” Echoing what we said one week earlier, the blog concluded that “if Donald Trump intends to flex the fiscal lever, bond market vigilantes could return with a vengeance, making it increasingly expensive for him to do so.” Continue reading »
It is official: Trump or no Trump, foreign central banks, SWFs and virtually every other official institution in possession of US paper, and as of this month, private investors too, are liquidating their Treasury holdings at a record pace.…