Debt and the Global Economy

We couldn’t pass up the opportunity to see Carmen Reinhart, a professor of the International Financial System, Harvard Kennedy School, and author of the book “This Time is Different: Eight Centuries of Financial Folly” speak live at the Chicago Council on Global Affairs this week. Given she was apart of the advisory board of the New York Fed, we were intrigued to hear her insight. With her focus specifically on various crises, whether that be currency, bonds, equities, or commodities. Instead of trying to paraphrase her speech, she seemed just the person to highlight on the blog. Instead of paraphrasing her entire speech, we decided to highlight the charts we found interesting, given this current environment of “hold on and wait” regarding interest rates.

Debt

While it’s not at its highs during the 2008-2009 crisis, debt as a percent of GDP is still at its highs.

gross-total-debt-as-percent-of-gdp

So has Public Debt…

public-debt

Reinhart explained this is due to the 2008-2009 financial crisis. Private debt became public debt after the crises, and the public assumed the debt of the banks.

Negative Interest Rates

We wrote about the unprecedented dominance of negative interest rates in the global economy, but Reinhart argues this isn’t unprecedented. If you adjust rates for inflation we’ve seen this before, at least for short-term rates.

short-term-rates-negative-rates

Digger deeper, we can see the numbers of advanced countries that have used to be and  are currently are operating with negative interest rates.

negative-short-term-interest-rates_1

Emerging Markets

emerging-markets-60-percent-of-world-gdp

china-2014-gdp-debt

Oil

fuel-oil-producers

To see her full presentation as well as her proposed solutions to debt and the global economy, click here.

 

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Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

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