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Global Debt

Why is virtual every country run on debt ? What happened to reserves and assets which provided a safety net when difficult times needed to be paid for ?


The headline is, countries are borrowing money from other countries who borrowed money to lend the money to a country borrowing it !! How crazy is that.


The world's desire to build, to be the best at something, to have the biggest military, to command trade, to provide healthcare - what ever it is, is spiralling debt to stratospheric levels.


Then we have the media spin on everything. China, America and India are the most efficient economies right now. In China and certainly India's case the most efficient yet under developed. China is building big cities, India only scratching the surface of country wide infrastructure. The USA is always in the news as congress votes on the next lift in the debt ceiling the country is willing to embrace. It's always complicated by the politics and in recent years the impasse caused government shut downs on both sides of the isle as party politics used the debt issue to hammer their foes in Washington.


So much media is focussed on this, we miss the fact that Japan, UK, France and Italy are not faring well at all. If these countries were companies, the stock market would savage them. The corporate term is being 'over-leveraged'. Having too much debt with not enough income or assets to back that debt up.


Yet in the world of politics and country management, the government is able to borrow virtually limitless amounts of money and take a view of repayment over 30-50 years.


Of course the borrow is fuelled by external events, whether that be a tsunami, hurricane or bank meltdown that the government steps in and borrows to bail the situation out.


I read a great book about China once, which said the government there took a 100 year view on it's big decisions. China once owned 40% of the USA's mortgage debt, and interesting the position changed a couple of years before the devastating financial melt down of 2003.


We never really know what goes on behind the scenes, to what extent conferences like Davos or the Bilderberg Group have on government globally.


No one talks about Brexit in terms of debt. If and when we leave the EU, it will cause a cascade effect across the finances of countries in Europe. As we refinance our debt to create some distance of reliance on Europe, those countries lending us money have to also restructure their own finances. Will the next lender, lend at the same rate as before. We as a country owe 28% of our debt to foreign entities which equates to nearly £1 trillion pounds. It's mind boggling.


My own take on Brexit is the EU is more worried about the financial restructure needed across Europe, which could cause catastrophic financial consequences to France, Ireland, German, Italy and Greece, that it would diminish the EU's ability to service it's own debt. That pushes the combined debt outside the region, to be financed in Asia, South America, China, Russia and India as those economies rise. Who wants to be 'owned' through debt by an emerging financial powerhouse in Asia


Meanwhile, China for years has been offering money for minerals across Africa, building roads, and infrastructure for African countries who's leaders won't invest. The wealth generation of all of that, can fund the currency manipulation China exercises in Global markets for decades to come. China is building up it's ability dominate global financial markets - when will it be ? Who knows.



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