Global QE Is Coming: Let the Gold Mania Begin!
In my last article I commented on Japan's coming debt time bomb (Massive Japanese Debt Monetization is Coming, Yen to be Devalued),
in which I made the case that Japan had a tremendous amount of their
debt maturing over the next three years and that the Bank of Japan was
likely to monetize much of it and weaken the Yen as a result. Since then
I've dug a bit deeper and taken a look at the top 10 debtor nations of
the world to see if they too had a large portion of their total
outstanding debt maturing in the near future. What I found startled me: Nearly 50% of the total outstanding debt of the world's top 10 debtor nations needs to be rolled over by the end of 2015.
table below breaks out the total outstanding debt for the world's top
10 debtor nations and looks at how much comes due by year.
at the total amount of debt tells only a part of the picture because it
doesn't tell you how soon the sovereign debt mountain will become a
problem. For that we need to see how much of it is coming due and how
quickly that debt will be rolling over. What precipitated the US housing
crisis was when adjustable-rate mortgages reset at higher rates
beginning in 2005 and into 2008 as homeowners couldn't afford the higher
payments. What I believe will precipitate the global sovereign debt
crisis is not necessarily the debt resetting at higher interest rates,
but debt maturing with not enough buyers to soak up the supply. This
brings about two consequences: either higher interest rates and thus
higher debt servicing costs or there is another option, which is central
banks stepping in and monetizing the debt. The latter option has been
going on now since 2008 and I believe it will be kicked into overdrive
between now and 2015.
table below helps provide some idea of the magnitude of global
sovereign debt maturing over the next few years by comparing the
cumulative debt maturing relative to 2011 GDP. By the end of 2016,
nearly 50% of the cumulative debt maturing for the top 10 debtor nations
combined relative to their combined 2011 GDP will have to be rolled
at the outstanding debt for the top 10 combined shows that just between
now and the end of the year more than $5 trillion in debt will mature,
or 17% of their total outstanding debt, and by 2015 nearly 50% of the
top 10 debtor nations total outstanding debt will come due. That is more than $15 trillion in debt coming due in the next two and half years!