Debt | - Part 3

A Solution to the Greek Debt Crisis

Perhaps the IMF, EU, and ECB should try attaching a pair of these to the legs of Greek Prime Minister Alexis Tsipras and Finance Minister Yanis Varoufakis prior to their next meeting.

From this story at the Atlantic which is actually kind of disturbing due to the enjoyment that law enforcement professionals get from this, particularly the test subject.

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A World Drowning in Debt

I don’t know the source of all the data presented in the chart below, recently stumbled upon in this item at the Confounded Interest blog, but nothing about it looks to be out of order. The only major shortfall would appear to be that China is not included and, after reading stories like this one, you have to wonder how they would stack up.

Everyone knows about Japan’s public debt, but the business and bank debt in the U.K. was a bit of a surprise to me. Also, it’s nice to see that our neighbors to the north have now caught up to the U.S. (or passed us – it’s hard to tell) as indebted spendthrifts.

U.S. Debt and Equities Since 1981

Doug Noland’s weekly commentary that provided some hard numbers to back up Bill Gross’ recent claim that the end may be nigh for the global financial system as we know it seemed to just be crying out for someone to make a stacked bar chart or two, so, voila!

Of course, for data points that span 33 years, you have to somehow adjust this to take into account population growth and inflation. Looking at stocks and bonds as a percentage of GDP seems like the right thing to do here, so, again, voila!

Less dramatic, to be sure, but equally disturbing when you think about it.

I mean, what, aside from the grotesque multi-decade expansion and current size of the global financial system itself, is so different between 1981 and 2014.

Much Ado About German Bond Yields

Funny things happen in math when you work with very small numbers very close to zero and, since bond yields have been in that range for some time now but have recently been heading higher, the financial media is fascinated by this, either because they’re bored with what’s going on in the world and are amusing themselves in any way they can or they simply don’t understand that this sort of math is just silly (granted, it’s not silly if you bought European bonds two months ago and now want to sell, but that’s not the point here).

A good example of this kind of silly math is to calculate a P/E ratio for a stock with infinitesimally small (but non-zero) earnings where the result is an unusually large number – say, a P/E of 10,200. Of course if you had divided by zero (which is, effectively what you’re doing here), you get something like #DIV/O! or “Cannot divide by zero”, but this doesn’t stop people from doing it when it’s not zero, but very close to zero.

Anyway, the recent ascent of bond yields in general and German bond yields in particular has attracted quite a bit of attention lately for reasons that should be obvious when looking at the chart below via

Any time you get this big of a move away from zero, all kinds of crazy math results such as that contained in German Bond Investors Just Lost 25 Years of Yield in 14 Days at Bloomberg and people are just fascinated by it.


Add the title above to the growing list of oddly amusing new words prompted by the ongoing crisis in Greece though, from the looks of the graphic below from this story at the Telegraph, they may be a bit premature.

Though Ireland appears to have pulled back from the abyss, never to return, the Italian economy is not looking so hot these days along with Cyprus that, until their own crisis a few years back, was flying (relatively) high.

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