Into the whirlwind

Article Abstract:

There is cause for concern about the high levels of Japanese public sector debt and US levels of private sector debt. Interest payments are a problem with public sector debt, but at least Japanese savers have bought government debt, so there is less of a risk of foreigners dumping bonds. The US has a budget surplus, but also has high levels of private sector debt. Much of this debt has been used for stock buybacks, allowing stock options to be given to employees without the stock price falling. Investors have borrowed to buy stocks, and would have to repay debt if stock prices fell, selling stocks and triggering further falls.

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A tale of two debtors

Article Abstract:

The US has a high level of private sector debt, and Japan has a high level of public sector debt. Japan's government debt is reaching record levels for any peace time developed economy, whereas much of the US private sector debt has come from stock buybacks and household spending. Debt has been used by companies to push up stock prices and by investors to buy stocks. High stock prices will mean continued borrowing, and US stocks appear to be overvalued. A recession is likely to be more severe as a result of these high debt levels.

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In the valley of the shadow of debt

Article Abstract:

Debt inflation is fueling the economic slowdown. households and firms in Japan, Scandinavia, Canada, the US and UK borrowed heavily in the 1980s and are using savings from today's low interest rates to pay back principal. Central banks need to back up lenders.

Analysis, Recessions

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