The Global Debt Crisis, and to a lesser extent the Asian Financial Crisis, was caused by people like you and me. Well, actually not by me because I am old and learned my lesson 45 years ago, and not by you because you are the Philippine economy.
All the people you hear screaming and yelling about government debt—almost always with a political agenda—do not have any idea how the real world operates. They know just enough to speak like they know what they are talking about to be able to push their political/economic ideas.
I could name names, but my sainted mother told me to never speak ill about the dead or the stupid. Besides, it would not make any difference anyway because it is probably true that dead people do not know they are dead, and dumb people are the same.
Sovereign or government debt is the biggest problem on the planet. That is why you should notice that virtually every human problem from poverty to bad viruses can only be solved by giving the government more money. In fact, problems must be created as often as possible—like the carbon tax—to raise more revenues from the people for the government.
Common sense solutions that were beginning to be followed in the past—like don’t throw your crap in the ocean—absolutely were not as good as giving government more money. Of course, the same problems are even more serious today so that means “MORE MONEY!”
The global financial system is on the brink, not in terms of time necessarily but in terms of the size of the coming chaos. Government went on a serious debt binge starting around 1997 and seriously in 2000 because that is what the people wanted. We are all greedy little suckers that would prefer free-stuff from government rather than having to pay for it, at least not up front.
Government borrows, gives free “insert-government-program-here,” the people are happy today, and the bill comes later. Just like with your credit card, which is my point.
I buy expensive items on zero-credit if the use-of-money factor is favorable. I learned many decades ago, having seven ‘Gold’ credit cards (I was a ‘wealthy’ stockbroker), that eventually you have to pay. Now, government never has to pay off their debt like you and I do. But if they cannot continue to find “Ponzi scheme” lenders to give them money, the system fails.
So, the people motivate the government to borrow more money with the clear understanding that the candidate that promises the most and the office-holder who gives the most, get the votes. If you think that “The People” are more responsible with debt than government, you are sadly mistaken.
American household debt has reached a new high, according to the Federal Reserve Bank of New York. Total household debt has surpassed $16 trillion for the first time in history increasing 8.6 percent YoY. The federal government had $28 trillion in debt but at least the government has a money printing press. The household debt is just as if not more serious because “The People” cannot spend debt repayment money for productive economic use. Government wastes a lot of its money anyway.
American household debt now accounts for 67 percent of the country’s GDP as of March 2022. And overall, the US is not that bad. Look at the other countries’ household debt to GDP: Canada (105 percent), UK (90 percent), and Japan (69 percent). Even our neighbors are in trouble: Malaysia (106 percent), Thailand (90 percent), Vietnam (130 percent), and Australia (125 percent).
The Philippines’s household debt accounted for 9.9 percent of the country’s Nominal GDP in March 2022, compared with the ratio of 10.2 percent in the previous quarter. The total Philippine household debt is down by $3.5 billion since January 2021. Indonesia’s household debt accounted for 9.7 percent of the country’s Nominal GDP in March 2022.
People—and governments—may be able to pay on their debt now, but as inflation and interest rates rise, that will become increasingly difficult. Government debt is the big financial system problem. But being unable to pay household debt brings the people into the streets with torches and pitchforks.
E-mail me at mangun@gmail.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis provided by AAA Southeast Equities Inc.