Safe Haven | Global Debt

Taken together, this supports the notion that the world as a whole has heavily indebted itself greatly over the past 20 years. It appears the world has doubled its collective debt to spend and speculate on housing, which is about to lose $25-50T on them.

Required Reading:

Recommended Reading - The Asset Securitization Crisis:

The next question is, just how much debt did these other countries lump on top of their property bubbles, and how much change did we see in the past 30 years?

Well, we have some data on that. Clear data is available on Australia and the US. There was also a most prescient piece put out by the OECD (again!) in December 2006, titled "Has the Rise in Debt Made Households More Vulnerable?" (source).

Consider these graphs of [Household Debt as % of Disposable Income ], and the % change in that figure, from 1995 to 2005 (source):

The graph below pulls us 10 years further back, comparing Household Debt / GDP for all OECD nations in 1985, 1995 and 2005 (source):

Below is the graph of Domestic Private Debt. This is different from household debt. It is defined by the CIA World Factbook (source) in the following way:

"the total quantity of credit, denominated in the domestic currency, provided by banks to nonbanking institutions. The national currency units have been converted to US dollars at the closing exchange rate on the date of the information."

What this can do for us is "plug in the gaps" to see where the major non-OECD members stand.

What this says to me is that most of the world is quite heavily indebted. The only ones who aren't are the non-Asian, non-OECD countries. And Germany.

Below is a graph of the change in the savings rate for the major OECD countries, as well as a graph of the savings rate for many of these countries from 1960-2006 (where available) (source, source, source, source):

It was shown above that Australia goofed up big time. They borrowed a ton, they stopped saving, and they had a huge housing bubble. Australia has been shown many times to have had a Private Debt bubble. The graph below shows that mortgage debt as a % of GDP went from ~16% in 1985 to ~85% in 2008 (source):

We really began shooting to the moon in 1985. Again, 1985 seems like the global starting point for the debt and spending craze.

Once again we see 1985 as a starting point. Debt was growing - hard - beforehand, but it was in 1985 when we saw homeowners' equity take a concerted leg downwards. And that was off inflated pricing. If we were to adjust pricing to reality, home equity would be even less.