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The Debt Bomb: 7,600,000,000,000 Dollars Of Debt Must Be Rolled Over In 2012

When it comes to government debt, it is not just new debt that is the problem.  Every single year, governments around the world must “roll over” gigantic mountains of debt that come due.  That means that the actual borrowing that takes place each year is far greater than the yearly budget deficits that you see talked about on television.  In 2012, a total of 7,600,000,000,000 dollars of debt must be rolled over by the G-7 nations, Brazil, Russia, India and China.  When you add in interest payments, that number rises to over $8 trillion.  And that does not even include any new borrowing that all of those nations will do in 2012.  This is a debt bomb that could devastate the entire global economy at any time.  Everything will be fine as long as global lenders are willing to lend these countries gigantic mountains of very cheap money.  But if that changes, and there are already a multitude of signs that a massive global credit crunch has begun, it will mean a complete and total financial nightmare for the entire world.

The following list compiled by Bloomberg shows the amount of debt that these various nations must roll over in 2012….

Japan: 3,000 billion
U.S.: 2,783 billion
Italy: 428 billion
France: 367 billion
Germany: 285 billion
Canada: 221 billion
Brazil: 169 billion
U.K.: 165 billion
China: 121 billion
India: 57 billion
Russia: 13 billion

Up until recently, these powerful nations have been able to easily roll over their debts each year because lenders have been willing to shower them with gigantic quantities of very cheap money.

But in 2011 bond yields for many European nations really started to soar.  When the cost of borrowing goes up, that puts a lot more pressure on the finances of nations that are already very deep in debt.

According to Bloomberg, it is being projected that borrowing costs for G-7 nations will rise very rapidly in 2012 as well….

Borrowing costs for G-7 nations will rise as much as 39 percent from 2011, based on forecasts of 10-year government bond yields by economists and strategists surveyed by Bloomberg in separate surveys.

Rising borrowing costs are a major reason why Italy is on the verge of financial collapse right now.

A year ago, the yield on 10 year Italian bonds was below 5 percent.  Today it is up around 7 percent.

During 2012, Italy must refinance approximately $428 billion of government debt.  If the rest of the world is not willing to buy that much Italian debt at current interest rates, that it going to create a major crisis.

Of course the European Central Bank could intervene even more than it has been, but there is a limit to what the ECB can do under current agreements.

The truth is that the European Central Bank has already spent over 274 billion dollars buying up the government bonds of troubled European nations such as Greece, Italy, Portugal and Ireland in an attempt to control the rise of bond yields.

But even with such unprecedented intervention, bond yields have still risen substantially.

Germany and other northern European nations are adamantly against the ECB directly funding the deficit spending of profligate southern European nations.  Germany has insisted that troubled nations such as Greece and Italy deal with their debt problems by implementing brutal austerity programs.

But all of this austerity will almost certainly bring on a major recession.  The following analysis comes from a recent article by Ambrose Evans-Pritchard….

The European Central Bank has guaranteed trouble by letting M3 money contract. Fiscal tightening into the downward slide will make matters worse. A credit crunch as banks shrink loan books by €1 trillion to meet capital ratios will do the rest. All policy levers are set on deep recession, and deep recession is what Europe will get.

And a deep recession will only make the debt problems of European nations even worse.

But Europe is not the only one in trouble.

Japan is also on the verge of complete and total financial collapse.  The government of Japan spends more than twice as much as it brings in, and public debt has risen to 237 percent of GDP.

Up until now, the Japanese government has gotten away with this because the Japanese people are great savers and they have been willing to lend huge mountains of money to the Japanese government for very little return.

But there are signs that the situation in changing, and if interest rates on Japanese debt go up even just a few percentage points it is going to be a total nightmare for Japan.

There is simply way too much debt all over the world.  Greece thought that they would be able to borrow cheap money forever, but now look at them.  The yield on 2 year Greek bonds is now up to 134%.

All of these nations that are gobbling up cheap money now should take note that this supply of cheap money will not last forever.

Unfortunately, our world has gotten completely and totally addicted to debt.  The following comes from a recent article by John Mauldin….

Total debt-to-GDP levels in the 18 core countries of the Organisation for Economic Co-operation and Development (OECD) rose from 160 percent in 1980 to 321 percent in 2010. Disaggregated and adjusted for inflation, these numbers mean that the debt of nonfinancial corporations increased by 300 percent, the debt of governments increased by 425 percent, and the debt of private households increased by 600 percent.

Of course the biggest debt of all is the national debt of the United States.  As of this moment, the U.S. national debt is $15,222,940,045,451.09, and the debt recently surpassed the 100 percent of GDP mark.

So why haven’t things collapsed already?

Well, it is because the U.S. can still borrow massive amounts of cheap money.

Right now, the average interest rate on U.S. debt is approximately 2.18 percent.

That is very, very low and it will not last forever. When it rises we will be in a heap of trouble.

And in future years our debt is projected to rise to absolutely insane levels.  The following chart comes from a GAO report that was just released.  To be honest, the projections that the GAO report uses are so optimistic that they are beyond ridiculous.  But even using those ridiculously rosy financial estimates, U.S. government debt is still projected to skyrocket to absolutely unprecedented heights in future years….

Once again, please keep in mind that the GAO chart above is based on projections that are unbelievably optimistic.

We are in a massive amount of trouble my friends.

At this point, we owe the Chinese nearly a trillion dollars.  They are running out of things to do with all the money they have gotten from us.  Recently it came out that the Chinese actually want to buy Yahoo.

We are mortgaging our future, and for what?

We have been so incredibly foolish.

So what is the solution?

How will our “leaders” solve our debt problems?

Well, world famous investor Kyle Bass recently said that a senior member of the Obama administration told him that “we are just going to kill the dollar“.

That doesn’t sound good.

So are we really going to print our way out of trouble?

Or will our financial system just simply collapse under the weight of so much debt at some point?

If our system does collapse, people are going to want something new.  Unfortunately, a growing number of Americans seem to think that socialism is the answer.  According to a new Pew Research Center poll, Americans between the ages of 18 and 29 actually have a more favorable view of socialism than they do of capitalism right now.

That is very sad.  The truth is that America has already been marching towards socialism for many decades.  The federal government just keeps taking more of our money and just keeps spending more of our money.  The following chart below shows how federal receipts have risen as  a percentage of GDP over the last 60 years….

If there is a massive global financial collapse, another solution that will inevitably be put forward is for the world to adopt a global currency.

The seeds for this have been planted for many, many years.  In dozens of books, television shows and movies about the future a “global currency” plays a major role.

Sadly, more than 40 percent of all Americans believe that we will see a global currency by the year 2050.  The following comes from a recent article in Wired Magazine….

But does this mean we don’t see a global currency in our future? For many, the answer is no. A recent Pew Research poll reveals that 41 percent of Americans expect it by 2050. Maybe the idea has been planted in our heads by leftist utopians and science fiction authors: a system of “credits” is used in everything from Star Wars, Star Trek, and Babylon 5 to the Foundation book series. Yet the idea has also been touted by economics titans like John Maynard Keynes.

Let us hope that the United States never is part of a global currency, because that would be the end of our national sovereignty.

But one thing is for sure – the world will never be the same after this debt crisis plays out.

Enjoy the prosperity of today while you can, because there is no way that it can last.

A massive financial collapse is coming, and it is going to shake the entire globe.

Sadly, most people simply do not care about the debt bomb that is hanging over the nations of the world, and the coming crisis is going to devastate their lives without any warning.

  • NWO Alert

    How will our “leaders” solve our debt problems?

    Two thirds of the national debt is owed to Americans and most of this is held by pension funds.

    Medicare and Social Security account for the largest part of unfunded liabilities.

    The obvious solution is to eliminate senior citizens. The New World Order already has a plan to do this:

    EUTHANASIA AND THE DEMISE PILL

    Everybody has a right to live only so long. The old are no longer useful. They become a burden. You should be ready to accept death. Most people are. An arbitrary age limit could be established. After all, you have a right to only so many steak dinners, so many orgasms, and so many good pleasures in life. And after you have had enough of them and you’re no longer productive, working, and contributing, then you should be ready to step aside for the next generation.

    Most of our “leaders” are now serving the New World Order – go figure!

  • mondobeyondo

    $7.6 trillion in debt being rolled over?! (breaking out in a cold sweat)

    And don’t forget, there is interest to be paid on this cash as well. Anyone with a high interest credit card knows this. (And just in case you don’t, they’ll be happy to remind you in your next month’s credit card statement.) Our nation is very lucky its interest rate is slightly above 0%, and not hovering somewhere around 29%. What happens if interest rates spike? Federal Government, meet Mr. U.S. Credit Card Consumer.

    Like any person that’s addicted to a substance or drug, we are going to need intense national therapy, um, austerity measures, if we are ever going to get out of this debt Mess. Now is the time. Tomorrow it will be worse, and the day after tomorrow even worse, and it goes on from there.

  • Gutter Economist

    The following chart below shows how federal receipts have risen as a percentage of GDP over the last 60 years….

    This chart appears to be making a “Head and Shoulders” top. If this is correct, the economic collapse might arrive by 2015 or sooner.

  • Gary2

    Michael-why can’t the countries just say we are defaulting? Who is going to get the haircut then? The rich and bankers? who cares. The rest of us are already getting major haircuts.

    I just talked to a guy tonight who was a steam fitter that lost his good paying job months ago and in Walkers WI he can’t even come close to his former wage.

    I think that unless Good family supporting jobs get created the crap low pay ones do not count as jobs.

    • Michael

      If multiple countries suddenly defaulted that would totally collapse the entire global financial system and large numbers of banks would fail.

      Michael

      • Rowell

        And that’s a bad thing? If the bankers are the problem, why not let them fail? I mean, if our economy and citizens are being forced to live with much less, forced into poverty so that the fat cat bankers can keep making billions of dollars by parking it in the Federal Reserve….why not let them fail.

        Sure, there’s going to be a lot of pain in that. But isn’t it going to happen eventually, since there is absolutely no sign that things are going to change?

        What’s wrong with scrapping the failure of a banking system, starting over fresh with the core of our Constitution? Go back to a gold standard, get businesses manufacturing back in THIS country, not overseas.

  • whoisbiggles

    Hello Michael,

    The Bloomberg source also listed the (coupon) interest payments to be made as follows:
    Country ($)Coupon Payments
    Japan 117 billion
    U.S. 212 billion
    Italy 72 billion
    France 54 billion
    Germany 45 billion
    Canada 14 billion
    Brazil 31 billion
    U.K. 67 billion
    China 41 billion
    India 39 billion
    Russia 9 billion

    Assuming these amounts have to be borrowed as well (happy to be corrected if I have misunderstood the table) the figure to be borrowed will be just over $8,300,000,000,000.

  • whoisbiggles

    Personally I don’t have a problem with a global currency as long as it is backed by and easily redeemable for silver or gold.
    Somehow I don’t think this is what the NWO has in mind ;p

  • Michael

    These are all the wealthy countries in the world.

    If they owe USD 8 trillion, who do they owe it to? And where did their creditors get all that money?

  • T.M.

    “To be honest, the projections that the GAO report uses are so optimistic that they are beyond ridiculous.”

    You are right, Michael. But it hasn’t always been that way. When David Walker was the Comptroller General–the head of GAO–the agency’s fiscal projections were much more realistic. Walker resigned in 2008. I don’t know his real reasons for stepping down since I had left two years prior. But many of my former colleagues didn’t like him because of all the changes he was making in the agency. So they started an employee union. When I was there, I got tired of hearing my coworkers complain about their compensation. I mean, we had it good! The pay and benefits were great.

    This past weekend I talked to a former coworker. She told me that things have really changed at GAO, and not for the better. The current head of the division I worked in has made it very difficult to work there, so much so that many people have left GAO, including my former coworker.

    • Michael

      Wow I didn’t know you used to work for the GAO.

      And yes – the projections from the GAO used to be SO much better.

      But even what they are admitting to is extremely frightening.

      Michael

  • Don Levit

    Why would there be so much demand for Treasuries at 2.8% interest, which is taxable.
    I have fixed-indexed annuities which vary with the S&P, and is guaranteed never to lose principal.
    While the S&P is about where it was 10 years ago, these annuities have benefited from the volatility, earning 6% a year, tax-deferred.!
    Don Levit

  • Jaysean (not the singer)

    I couldn’t even count all those zeroes at first glance

  • REED RICHARDS

    Michael,

    This is nothing compared to the 1.4 quadrillion dollars in derivatives that are sloshing around the planet. Look at the off-balance sheets of JP Morgan Chase, Goldman Sachs, Bank of America, Wells Fargo, Morgan Stanley, and Citi-Group, as well as central banks around the world, and this little 8 trillion of so called roll-over debt is like removing the couch cushions and finding nickels and pennies………

  • William

    I want to emphasize that the extremely LOW interest rates that have CRUSHED older Americans who have, in the past, have been able to rely on a reasonable CD rate, are intended only to keep the Federal government’s interest payments on the HUGE national debt at a low level, and NOT to spur the economy. This lunacy is compounded by the FED buying US govt debt. Americans, when this nightmare is over, I doubt if you will be voting for your incumbents in the US Congress, if we are allowed to vote at all.

    • Kevin

      William

      We will always be allowed to vote. Actually encouraged to vote to keep “democracy” alive.

      Voting placates the masses with a sense of self government. It allows “the other party, guy or gal” to be blamed when the reality is both horses are bought in a two horse race. Ask the general public who or what party gave them “Free Trade” and 8 out of 10 will say, “The Republicans” after saying how they long for Bill Clinton and wish he would return to government.

      It takes very little effort to hoodwink people that truly want to believe you.

  • Cinderella Man

    Wow Michael, you would think youre talking about a parallel universe according to CNBC.
    From an article entitled “A Flat Market in 2011 Could Mean a Rally This Year” (While strategists are not overlooking the fact the euro zone woes will continue to drive the market bus this year, they remain confident the region’s leaders will come up with more solutions to handle the ongoing sovereign debt issues, helping soothe investor fears.) Here’s another quote from the same article: (Following last year’s pancake-flat finish for the S&P 500, most strategists agree that there is no other direction for markets than up in 2012.) LOL LOL LOL! See, don’t you feeeeel better? No other direction but UP? The laws of physics and economics dont apply in Fantasy Land!!! So forget about this big bad debt boogeyman! Its nothing to be worried about, we have the best and brightest minds working on this problem night and day just like Fukushima!

  • mondobeyondo

    Aw, who cares?! A trillion here, a trillion there, and pretty soon you could feed the entire population of Thailand!

    Unfortunately, that is not where the money is going.

    • Kevin

      I try to think of the numbers in relative terms. The US economy exchanges 14 Trillion / year. The entire world economy exchanges 54 Trillion / Year. The lower end of derivatives estimation is 600 Trillion.

      The derivatives are over 11 times the economy of the entire world or 11 years of the world economy; take your pick. From the Saudi Prince to the McDonalds fries trainee and everyone in the middle x roughly 7 billion people. Damn, that is BIG…..very very BIG.

      When that collapses it’s more akin to a black hole then a burst of a bubble.

      • Ron Thompson

        Kevin,
        That derivatives number is astonishing. The gambling economy is 11 times the size of the productive economy? Unbelievable, but I don’t it! Where did you get that information?
        Thanks,
        Ron

  • mark

    This debt is so large that we can’t pay it back and at the same time continue to have the welfare state. When the cuts happen riots will be everywhere. We will go into a depression until much of this mess is cleaned up. They will print or default our way out of this debt. I would not loan money to this government. Instead put your money into food and other long term storage items that you need to live. We might as well print our own cash instead of letting the Fed loan it back to us through the banks. I do not think that our government will make the cuts that are needed to make a difference. I am concerned that we will continue to lose freedom and it will be replaced by a socialist police state in the future.

  • Tonirris

    It is simpler that it looks: The countries that produce more than they consume have money to loan others that spend more than they produce (just like common people) Our country in last few years has introduce big money into politics, therefore the government (our politicians) are selected by different financial interests and agendas. This way, their decisions are base on monetary interests, no the citizen’s interests. Example, we borrow money from China and we spend it in Iraq (political decision), then we expect to make money extracting their oil, so the oil companies can make billion of dollars in profits. Who gets to pay the borrowed money plus the interest, plus the cost of supporting the families of the dead and the bunded?….WE, The People (the TAX PAYERS).who keeps the oil profits?…….you got it.

  • Pauly

    Just think how much interest the bankers will make on treasuries. They are doing gods work.

  • Tatiana Covington

    We all know what happens when one gets rolled over. One gets ***************!

  • Stuey

    I know you said the percentage of GDP chart was optimistic.

    But it seems to me it is toally off. Like you said in the article, we are now at 100% GDP. But the chart says we won’t reach 100% until 2035. And at the rate we had added debt in the last 5 yrs, we should be at 150% within another 5 yrs., but it shows we won’t be at 150% until 2050.

    How could this chart have just been recently released? Is the government this far off or just idiots?

  • MM

    Default so the burden is less in the future… defaults have happened in the past and the countries come back stronger. There will always be a market for U.S. Treasuries even as rates go up… Politicians suck but they have to do something positive sometime like we’ve done in the past.