Who’s Debt Are You? – Latest Statistics

There’s been some buzz in the markets lately, concerning the health of America’s sovereign debt. The nation owes other countries about USD 5,7 trillion, and about 3 trillion is due this year. Investors are worried that the US won’t be able to borrow much more, at least not to the same low price,  and that big buyers of US Treasuries, like China and Russia, may start dumping their bonds to put USA in a financial squeeze. Well, I wouldn’t worry too much. You see, most countries who are lending money to the American government are receiving huge loans from US banks. The next victim of the debt crisis is probably not USA, nor the EU.

“Claims on advanced economies contracted by $342 billion between end-December 2012 and end-March 2013, mostly due to reduced claims on banks and related offices. This marked the sixth consecutive quarterly decline in interbank positions on advanced economies and brought the cumulative reduction since end-September 2011 to $1.9 trillion. In contrast, claims on borrowers in emerging economies increased by $265 billion between end-December 2012 and end-March 2013.”

Bank of International Settlements – BIS

The Bank of International Settlements (BIS) recently realised new data and statistics on global debt, an interesting oversight on who-owes-who in a world ridden by fear of economic collapse and social unrest. The numbers reveal a picture slightly different from what most people see.

F.ex: European countries owe foreign nations twice as much as the United Nations owe others. And there seem to be several groups of nations, connected through the same banks, but for some reason it is not the countries with the largest debt who are in most trouble.

We already know the US numbers, and the Americans owe most of the money to themselves, anyway… (Federal Reserve, that is.). The 5,7 trillion debt to foreign countries is a relatively small sum compared to the grand total of about 14 trillion.

Elsewhere, the sovereign debt, with all its derivatives, represent a much higher risk.

Europe’s Fab Four

Consolidated foreign claims of 24 reporting banks – immediate borrower basis.

United Kingdom – USD 3,2 trillion.
Germany – USD 1,8 trillion.
France – USD 1,6 trillion
 Netherlands – USD 1,9 trillion.

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And who do they borrow from?

United Kingdom:

1. Other EU bank: 1,5 trillion.
2. France: 200.200 million.
3. Australia: 121.577 million.
4. Canada: 102.963 million.

Germany:

1. Other EU banks: 1,1 trillion.
2. France: 198.000 million.
3. Austria: 37,914 million.
4. Canada: 23.838 million.

France:

1. Other EU banks: 714,235 million.
2. Canada: 24,612 million.
3. Belgium: 23,536 million.
4. Austria: 13,442 million.

Netherlands:

1. Other EU banks: 577,427 million.
2. France: 156,857 million.
3. Belgium: 22,746 million.
4. Canada: 13,722 million.

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And who have most money outstanding?

1. United Kingdom – USD 2,6 trillion.
2. Germany – USD 1,5 trillion.
3. France – USD 1,2 trillion.
4. Netherlands – USD 0,8 trillion.

Is there a pattern here?….somewhere?

The BIS writes:

“The latest international banking statistics show diverging trends in credit to advanced economies and emerging markets. Claims on advanced economies contracted by $342 billion between end-December 2012 and end-March 2013, mostly due to reduced claims on banks and related offices. This marked the sixth consecutive quarterly decline in interbank positions on advanced economies and brought the cumulative reduction since end-September 2011 to $1.9 trillion. In contrast, claims on borrowers in emerging economies increased by $265 billion between end-December 2012 and end-March 2013. The expansion was driven mostly by credit to emerging economies in Asia, especially China. In recent years, BIS reporting banks’ exposure to Asian credit risk has increased even more rapidly than their lending to Asian borrowers because lending has been accompanied by a reduction in net credit risk transfers out of the region.”

That means we now have a USD 30 trillion (+) debt bubble in transit between different parts of the world! (At the same time the richest people in the world has more than 20 trillion stacked away in places like Claman Island to avoid taxes.).

Just great….

The Asians now owe other countries – mostly European – close to USD 2 trillion, with China‘s debt closing in on USD 600,000 million.

The rest is as follows:

South Korea: 309,363 million,

India: 304,920 million.

Chinese Taipei: 161,404

Malaysia: 155,500 million

Thailand: 102,299 million

Indonesia:  100,770 million.

NOTE:

Statistics at end-March 2013 are preliminary and subject to change.

Data are available on the BIS website, via the BIS WebStats query tool, or in a single PDF indetailed annex tables. Developments in the latest data are highlighted in the Statistical release.

Revised data and an analysis of recent trends will be released in conjunction with the forthcoming BIS Quarterly Review, to be published on 16 September 2013. Data at end-June 2013 will be released no later than 23 October 2013.

Related articles:

• UK economy: a miraculous recovery – or a blip in a longer-term decline? (theguardian.com)
• The real state of the world economy is dire (goldswitzerland.com)
• The On-Going Collapse Of The U.S. Treasury Bond Market Is A Disaster In The Making (blacklistednews.com)
• Local government debt in China may trigger a financial crisis (wantchinatimes.com)
• Japan’s debt: 1,000,000,000,000,000 yen (smartplanet.com)

EU To Extend Greek Aid

Senior EU officials believe Greece will fail to reduce the nations debt as agreed in the €110 billion bailout deal made with EU and the IMF earlier this year. As a consequence, EU leaders are now considering an extension of the Greek aid.

“EU officials believe the Greek government will not be able to apply the hard conditions of the memorandum of understanding within the appointed time-frame.”

Greek Daily

EU officials are considering an extension to financial support for Greece, as analysts increasingly question to country’s ability to stand on its own feet by 2013, several Greek and European media reports.

The Greek newspaper, Ta Nea, reports that EU officials are considering an extension to the country’s aid package, due to doubts over investor appetite to return to Greek bond purchases.

The EU Troika: Mr. Martin Palous, Mr. Anders Liden, Mr. Pedro Serrano, Mr. Fernando M. Valenzuela.

“Senior EU officials believe the Greek government will not be able to apply the hard conditions of the memorandum of understanding [between Athens and its international lenders] within the appointed time-frame,” the Greek Daily writes.

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There are also questions marks over the center-left government’s ability to continue the pace of reforms, according to the EUobserver.com.

Concern about tax revenue collection will remain a major problem in a country tax evasion is almost like a tradition, the IMF is set to dispense a team of permanent officials to Athens.

Just Getting Worse

Despite the introduction of numerous unpopular tax increases and salary cuts, causing both international plaudits and protests in the streets, Greece’s debt to GDP ratio is still expected to reach 150% by 2013.

In May this year the EU and IMF agreed to provide Greece with a three-year €110 billion loan after weeks of spiraling borrowing costs in the international capital markets.

George Papandreou

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The condition was that the Greek government implemented a tough package of economic reforms.

But the recent austerity measures have contributed to the country’s recession.

The Greek economy set to shrink by four percent this year.

This in turn has complicated government efforts to cut its deficit from 13.6 percent in 2009 to 8.1 percent of GDP this year.

On The Road Again

During a two-day road show of European capitals last week in a bid to win back investors, Greek finance minister George Papaconstantinou repeatedly vowed that the government would not restructure its debt at any point.

When the Greek PM, George Papandreou, visited Oslo/Norway last week, he  claimed that investors confidence was about to return to Greece, pointing to the Norwegian Pension Fund Global (SWF) who’s been shopping for large chunks of Greek bonds lately.

However, the Norwegian SW fund seem to be about the only one:

The Consensus Demand Meter, Q3 2010.

Ireland‘s Endless Corner

Doubts over a second euro zone country – Ireland – have also increased in the recent days.

Ireland’s shaky banking sector has led to growing fears amongst the market participants.

Last Friday 10-year bond Irish bond yields moved over six percent, 3.7 percent higher than their German equivalents, after a Barclays report said  that Dublin could be forced to seek external aid at some point if conditions worsen.

Brian Lenihan

According to the Sunday Telegraph, Irish finance minister Brian Lenihan rejects speculation that the cost of bailing out the country’s banking system will force the government to turn to an EU-IMF emergency fund, like the Greek bailout deal.

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However, the Irish finance minister have been forced to make some turns before.

Here’s a quote from a speech Brian Lenihan held on December 10th last year:

“The inauguration of John F Kennedy as President of the United States in 1961 gave a powerful sense of hope, possibility and self-belief to Irish people all over the world,” he said, speaking about how the Irish people wanted the country to start believing in itself again.

He had earlier declared that the “worst is over” and that “we are now on the road to economic recovery”.

“As we begin to emerge from the unrelenting economic gloom of the last 18 months, we need to rediscover our optimism and our self-belief.”

He concluded by stating: “Our plan is working.We have turned the corner.”

Well, tomorrow (Tuesday) Mr. Lenihan will turn/return to the capital markets in an attempt to sell €1.5 billion in Irish bonds…

Related by the Econotwist:

Summer’s Over; Greek Protests Continues

Default Now Or Default Later; Greece Still Withholding Critical Data

Brussels Tells Athens To Shut Up And Take The Pain

Ireland Downgraded By Moody’s

Bundesbank: Ireland Will Destroy The Euro Zone

Morgan Stanley: Governments WILL Default

People’s Confidence In The EU Drops To Record Low

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Related Articles

• IMF poised to send permanent officials to Greece (guardian.co.uk)
• Greece delays bank stress tests (guardian.co.uk)
• As bond auction approaches Lenihan says Ireland won’t need EU or IMF help (politics.ie)
• Ireland needs to rethink budget plan: central bank government (reuters.com)
• Bonds: Ireland and Portugal still struggling with cost of borrowing (guardian.co.uk)
• Greece Says Bonds an ‘Opportunity’ as Deficit Falls (businessweek.com)
• Greece May Miss Revenue Goal, Sell Diaspora Bond, Minister Says (businessweek.com)
• Greece Planning “Diaspora” Bonds – Finmin (nytimes.com)
• The once and future sovereign crisis (ftalphaville.ft.com)
• Ireland’s finance minister quashes IMF bail-out story (telegraph.co.uk)

Norway's Foreign Minister Makes "Chainsaw Massacre" of G20 Meeting

Norway’s Foreign Minister, Jonas Gahr Støre, shows the international community that he’s got bigger balls than most politicians these days. In an interview with the German magazine, Der Spiegel, he cuts the Group of 20 into little pieces; questioning the organizations legitimacy and calls it “the greatest setback since World War II“. The G20 representatives will meet in Toronto this weekend to discuss the global economic crisis.

“The G-20 is a self-appointed group. Its composition is determined by the major countries and powers.”

Jonas Gahr Støre

Norway’s foreign minister has described the group of the 20 most important industrialized and developing nations, which will meet this weekend in Toronto, as the “greatest setback” for the international community since World War II. In an interview with SPIEGEL ONLINE, Jonas Gahr Støre explains why the organization won’t function in the long run.

SPIEGEL: Mr. Foreign Minister, this week the most important industrial and developing nations will meet at the G-20 summit in Toronto. You oppose the organization. Is that because Norway, which is one of Europe’s richest countries, is not a part of it?

Jonas Gahr Støre: No. The G-20 had a meaning when the financial crisis broke out, the situation was serious and joint decisions had to be swiftly made in order to calm the markets. This importance remains. But the G-20 is a grouping without international legitimacy — it has no mandate and it is unclear which functions it actually has.

SPIEGEL: The president of the European Central Bank, Jean-Claude Trichet, views the G-20 as being the main forum for steering the global economy.

Støre: It is for precisely that reason that one must be allowed to question its legitimacy. After World War II, we set up international organizations like the United Nations, the World Bank or the International Monetary Fund with clear responsibilities and clear mandates. We need to make them fit for the new realities in the world and for the new balance of power.

SPIEGEL: Isn’t the G-20 an attempt to do precisely that?

Støre: The G-20 is a self-appointed group. Its composition is determined by the major countries and powers. It may be more representative than the G-7 or the G-8, in which only the richest countries are represented, but it is still arbitrary. We no longer live in the 19th century, a time when the major powers met and redrew the map of the world. No one needs a new Congress of Vienna.

SPIEGEL: Who do you feel is missing from the current grouping of major powers?

Støre: South Africa is part of it, but not as a representative of Africa. Saudi Arabia is part of it, but not as a representative of the Arab world. So why is the European Union represented in addition to having four individual EU member states and two others as observers? That is not acceptable. You don’t have to change everything, but with a few small adjustments you could achieve a regional representation like that which we have achieved with the International Monetary Fund or the World Bank, among other organizations. We need the kind of strong, smaller alliances, or “voting groups,” of the type that we see, for example, with the Nordic or the Baltic states, so that we can react quickly.

SPIEGEL: What can the Nordic countries do better than the G-20?

Støre: Taken together, the Nordic countries are the world’s eighth- or ninth-largest economy. We are small in terms of our populations, but we are big in terms of our economic power. Norwegians are the biggest contributors to the international development programs of the United Nations and the World Bank. Norway’s trade surplus is one-third of China’s, and its current account surplus is one-third of that of Germany. Our pension and future fund (editor’s note: the sovereign wealth fund that reinvests Norway’s gas and oil riches for future generations) is the second largest in the world. So our experiences could be valuable in discussions about a reform of the global financial world.

SPIEGEL: Other countries could also use the same justification to demand admission to the Group of 20.

Støre: The 20 or effectively 22 are big, but there are also the countries that play a decisive role in a few areas. If the G-20 or another international body were to discuss, for example, energy security without Norway, which already provides one-third of Germany’s natural gas, then that would be a real surprise for everyone. When climate change is discussed, one has to keep in mind the fact that Norway makes one of the largest contributions to saving rainforests and pays out billions of dollars, we should also have a voice, because we have something to say. Decisions on fighting poverty in the world without the participation of Norway, Denmark and Sweden, who make the greatest financial contributions, make no sense.

SPIEGEL: If Norway wants to strengthen its international influence, then why don’t you just join the EU?

Støre: Because our people have rejected (membership) twice in referenda, the last time 16 years ago. In contrast to my own wishes, there is no majority support for membership today either. That is how democracy works.

SPIEGEL: Proponents of the G-20 want to reform the body and also to provide it with additional competencies — in combating climate change, international development and in health care.

Støre: It would be a great paradox if the G-20 contributed to undermining the legitimacy of the UN and its institutions. It would mean a further creeping devaluation of the responsible world organizations, if decisions like those of the World Health Organization or the World Trade Organization were in the future effectively made in advance by the G-20.

SPIEGEL: The UN and its institutions haven’t exactly proven themselves to be powerful instruments in the fight against global crises.

Støre: But that cannot lead us to give up reform of, for example, the UN Security Council and instead, out of convenience, create a new body with a new voice. That would be a kind of “key mandate” for a small, self-appointed group against the rest of the world — the remaining 170 or 171 nations. From that perspective, the Group of 20, in terms of international cooperation, is one of the greatest setbacks since World War II.

SPIEGEL: Will the summit in Toronto this week make progress on introducing a global bank levy and bank participation in providing financial help to bankrupt countries like Greece?

Støre: That is a difficult task. The ability to find a compromise between the divergent national interests will show just how serious the desire for better international regulation of the financial markets really is. But it still doesn’t answer the question of whether the world will accept the decisions made by the G-20.

Interview conducted by Manfred Ertel

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Jonas Gahr Støre (49):

Member of the social democratic Norwegian Labour Party and has served as foreign minister of Norway since 2005. Støre completed naval officer training at the Royal Norwegian Naval Academy and later studied political science in Paris. Prior to becoming a minister in the Norwegian government, Støre was secretary general of the Norwegian Red Cross.

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