A new report, the 16th annual Geneva Report, commissioned by the International Center for Monetary and Banking Studies, carries a warning about the debt situation in the world.
This report documents "the continued rise of debt in both advanced and emerging economies at a time when most talk is about how the global economy is deleveraging…"
Not only is the amount of global debt high, and rising, but slowing nominal GDP (coming from both slower real economic growth and disinflation or possible deflation) is raising the total burden of world debt, public and private.
Total debt in the world "has risen from 160 percent of national income in 2001 to almost 200 percent after the crisis struck in 2009 and 215 percent in 2013." The report goes on, "The global debt-to-GDP ratio is still growing, breaking new highs."
The concern - the Federal Reserve seems poised to raise interest
One of the factors contributing to the treasury market's strong performance this year has been the Liquidity Coverage Ratio (LCR), a Basel III-based requirement for banks. These rules go into effect in 2015 and are phased in gradually through 2017 in the United States (the implementation period is longer in some countries). LCR requires that banks hold sufficient amounts of liquid assets to withstand a significant loss of funding sources (such as depositors withdrawing). This need for liquid assets has resulted in banks accumulating treasuries - which they've ramped up to record levels this year - and to a lesser extent GSE debt.
One would expect banks to buy treasury bills or short-term notes to meet their LCR requirement but that did not turn out to be the case. Lenders showed a willingness to take rate risk and ended up focusing on 5- and 7-year paper.
Not all bulls are eager and itching for a fight. Ferdinand the Bull, the delightful lead character from the 1930s children's book of the same name, stubbornly resisted brawling and battling with the vicious and furious picadors and matadors he faced in the bull ring. Ferdinand, much like your author, preferred to gaze at the blue sky and smell the flowers, rather than tangle in the mud with his adversaries. Refusing to fight, Ferdinand was unceremoniously ejected from the ring. The affable bull retired to his home town farm, where he lived out his days in peace and harmony - proving you don't have to fight to be a bull! The book was banned and burned for its pacifist overtones in fascist Spain and Germany, and embraced by Gandhi and surprisingly, Uncle Joe himself, Comrade Stalin!
I introduced Ferdinand here to call attention to another reluctant bull - financials, and