The Debt that Emerging Markets Bear

Me: The world owes over US $ 247 Trillion.

Also me: Whom do we owe it to – The Decepticons?

Yeah, that’s an old joke repackaged with new figures, but the figures are real, or an estimated real as no one knows exactly how much debt is floating around. According to a report in Bloomberg that figure represents three times the Global Economic Output.

While most of the debt held by the developed world has held relatively steady at around $170 Trillion, the debt being carried by emerging markets like BRICS, Turkey, Argentina etc. – and most of that debt is carried in dollars - has just about doubled since the last GFC.

China alone has a Gross National debt (estimated) of over $40 Trillion, up from just under $7 Trillion in 2008. The rest of the emerging markets between them account for a shade over $30 Trillion, up from just about $16 Trillion in 2008. (This figure is the best guess estimate of the debt held by government, government agencies, financial firms, non-financial corporates, and households).

In actual terms this means that the burden of the whole extra 20% increase falls on the less than sturdy shoulders of the Emerging Markets.

So what Greg, what’s the interest here?

The interesting thing here is the currency most of this debt is held in – The Almighty United States Dollar. And all the interest -to the IMF, the World Bank, to various other International lenders - has to be paid in the Greenback.