Economy China's Debt has exceed 300% of GDP-- now 15% of global debt

[Beaver Brownlee]

https://www.zerohedge.com/news/2019-07-19/something-just-broke-china-repo-rate-soars-1000-overnight

 

[Madmick]

btw the OP is filled with lots of ignorant rambling.

Public debt is not a Ponzi scheme (that statement shows equal ignorance towards public debt AND Ponzi schemes) and the US national debt has fuck all to do with importing immigrant labor. The countries exporting said labor also have national debt of their own. How come?

It's figurative, Keynes. Only the dense will fails to grasp this.

 

[MiniCraque]

It's figurative, Keynes. Only the dense will fails to grasp this.

I'm well aware you didn't mean it in a literal sense.

It's still a meaningless comparison.

btw can you elaborate on what the fuck is "GDP growth-to-debt ratio"?

 

[Madmick]

I'm well aware you didn't mean it in a literal sense.

It's still a meaningless comparison.

btw can you elaborate on what the fuck is "GDP growth-to-debt ratio"?

GDP growth as a ratio of the debt relative to GDP. There's probably a more specific term.

 

[MiniCraque]

GDP growth as a ratio of the debt relative to GDP. There's probably a more specific term.

Cool.

If China's total (that is household, corporate and government) debt rose from 297% to 303% of GDP (and the article doesn't break that down into the 3 individual items), that means total debt rose by a little over 2%. GDP growth was 6%. Why is the ratio we could extrapolate from that catastrophic? What would be a healthier number?

 

[GearSolidMetal]

Honest question - WTF happens to the world trade system if China financially fails?

 

[Madmick]

Cool.

If China's total (that is household, corporate and government) debt rose from 297% to 303% of GDP (and the article doesn't break that down into the 3 individual items), that means total debt rose by a little over 2%. GDP growth was 6%. Why is the ratio we could extrapolate from that catastrophic? What would be a healthier number?

A sustainable ratio. After all, you're quoting a percentage of an absolute debt that constitutes 15% of the global share, and it appears your calculating for its inflation from a single year.

 

[MiniCraque]

A sustainable ratio. After all, you're quoting a percentage of an absolute debt that constitutes 15% of the global share, and it appears your calculating for its inflation from a single year.

Define sustainable. GDP growth (6%) was higher than that of the total debt (~2%). If you looked at the numbers and concluded they're "catastrophic", surely you must have some idea on what wouldn't be catastrophic.~

By the way, China's GDP is about 15% of the world's total GDP. That lines up with their share of total debt. Why is that 15% share troublesome?

 

[Madmick]

Define sustainable. GDP growth (6%) was higher than that of the total debt (~2%). If you looked at the numbers and concluded they're "catastrophic", surely you must have some idea on what wouldn't be catastrophic.~

By the way, China's GDP is about 15% of the world's total GDP. That lines up with their share of total debt. Why is that 15% share troublesome?

Because you're comparing similar but unrelated percentages according to preexisting fixed totals. It's unquestionably not sustainable, and that's because their debt growth is outpacing their GDP by a ratio of 3:1. The only reason this is acceptable in a one-year window is because their GDP is currently so much larger than their total debt. My past reading has suggested that economists tend to believe than a sub-80% debt-to-GDP ratio is ideal.

What do you think is a long-term sustainable debt-to-GDP ratio?

 

[MiniCraque]

Because you're comparing similar but unrelated percentages according to preexisting fixed totals. It's unquestionably not sustainable, and that's because their debt growth is outpacing their GDP by a ratio of 3:1. The only reason this is acceptable in a one-year window is because their GDP is currently so much larger than their total debt. My past reading has suggested that economists tend to believe than a sub-80% debt-to-GDP ratio is ideal.

What do you think is a long-term sustainable debt-to-GDP ratio?

No, you are, and I'm trying to dissect what you mean. A countries total debt relative to it's GDP growth isn't really a comparison often made because they're indicative of different things. Again, total debt includes debt held internally. So it isn't really a measure of "sustainability" as it is of financial activity (or lack thereof). When you take on a mortgage, the US total debt increases, but that doesn't really say much because you owe money to a US bank. Your debt is their asset.

It sounds to me like you're confused. The 80% debt-to-GDP ratio you referenced is in terms of national debt (i.e. debt held by the government). And again, that isn't really a measure of sustainable growth as much as it is of the financial health of the public sector. China's debt-to-GDP ratio is around 65%, compared to ~105% of the US.

Speaking again of the 300% ratio referenced in the article, are you aware that the US total debt to GDP is over that mark? It was at 400% before the GFC. It's lower now, but I'm pretty positive it's still well above 300%

 

[Madmick]

No, you are, and I'm trying to dissect what you mean. A countries total debt relative to it's GDP growth isn't really a comparison often made because they're indicative of different things. Again, total debt includes debt held internally. So it isn't really a measure of "sustainability" as it is of financial activity (or lack thereof). When you take on a mortgage, the US total debt increases, but that doesn't really say much because you owe money to a US bank. Your debt is their asset.

It sounds to me like you're confused. The 80% debt-to-GDP ratio you referenced is in terms of national debt (i.e. debt held by the government). And again, that isn't really a measure of sustainable growth as much as it is of the financial health of the public sector. China's debt-to-GDP ratio is around 65%, compared to ~105% of the US.

Speaking again of the 300% ratio referenced in the article, are you aware that the US total debt to GDP is over that mark? It was at 400% before the GFC. It's lower now, but I'm pretty positive it's still well above 300%

Ah, I see the basis of my lazy misreading. I must concede.

 

[The Diplomat]

I think you're misreading the story. That's combining corporate, household, and gov't debt. It's a bad story anyway--the only attempt to put the number in any context was comparing it with the previous year, and it doesn't really explain the effects. Obviously there is no economy-wide Ponzi scheme.

As for the question, remember that every debt contract has a buyer and a seller. It's not possible for the world economy to borrow from the future. A lot of bad takes could be prevented if people would just remember that the economy is goods and services.

Story: corporate, household, govt debts in China = 303% of GDP

Jack: let's try to spin and defend China, for some weird fuckin reason. It's only 303%.

Of course a commie like @BarryDillon would like this post.

 

[The Diplomat]

Honest question - WTF happens to the world trade system if China financially fails?

Well, Wal-Mart and the rest of American companies that utilize cheap product go in the toilet. Medicine, electronics, clothes, food, metal and other raw resources, etc. Prices rise immensely, creating a total shockwave throughout the system. Companies like Mcdonalds, Coke, Microsoft, Apple, etc. will take major financial hits and increase prices.

Oh yeah, plus Europe and every other nation that utilizes any kind of Chinese product or labor. Which is everyone.

 

[Jack V Savage]

No, you are, and I'm trying to dissect what you mean. A countries total debt relative to it's GDP growth isn't really a comparison often made because they're indicative of different things. Again, total debt includes debt held internally. So it isn't really a measure of "sustainability" as it is of financial activity (or lack thereof). When you take on a mortgage, the US total debt increases, but that doesn't really say much because you owe money to a US bank. Your debt is their asset.

It sounds to me like you're confused. The 80% debt-to-GDP ratio you referenced is in terms of national debt (i.e. debt held by the government). And again, that isn't really a measure of sustainable growth as much as it is of the financial health of the public sector. China's debt-to-GDP ratio is around 65%, compared to ~105% of the US.

Speaking again of the 300% ratio referenced in the article, are you aware that the US total debt to GDP is over that mark? It was at 400% before the GFC. It's lower now, but I'm pretty positive it's still well above 300%

Good post, but you should add that alleged theshold has been debunked (based partly on a coding error, but also conceptually weak).

 

[Jack V Savage]

Story: corporate, household, govt debts in China = 303% of GDP

Jack: let's try to spin and defend China, for some weird fuckin reason. It's only 303%.

Of course a commie like @BarryDillon would like this post.

Huh?

 

[The Diplomat]

Huh?

What?

 

[MiniCraque]

Story: corporate, household, govt debts in China = 303% of GDP

Jack: let's try to spin and defend China, for some weird fuckin reason. It's only 303%.

Of course a commie like @BarryDillon would like this post.

Nobody is "defending" China. Like I explained, pointing out their total debt to GDP ratio is 303% doesn't really say much. The US ratio is higher than that.

 

[Jack V Savage]

What?

Your whole post made no sense. You seem to think that Mick was hurting China by noting the metric and that I was trying to help them by noting the lack of context or meaning in the metric. It's strange. Makes you sound like a moron, TBH. You should try to get over whatever your issue is.

 

[MiniCraque]

Good post, but you should add that alleged theshold has been debunked (based partly on a coding error, but also conceptually weak).

Oh I didn't really wanna get into that debate. 80% is obviously nonsense (*laughs in Japan*) and even if it wasn't China is comfortably below it.

Most of the time when people settle on a number it seems to be because that number seems prettier. In reality there's a bunch of stuff that's going to factor into whether a certain ratio is "healthy" or not and not just the number itself. Currency strength, interest rates, etc.

 

[Last Samurai]

Story: corporate, household, govt debts in China = 303% of GDP

Jack: let's try to spin and defend China, for some weird fuckin reason. It's only 303%.

Of course a commie like @BarryDillon would like this post.

Jack simply pointed out that the OP is comparing apples to oranges, and that is a fact.