Monday, 25 June 2012

Government debt - rapidly turning bad

The world is changing faster than we realize. Take a look at these two charts. The one on the right looks at the total stock of OECD debt and sorts it in terms of is credit rating.  Before the crisis, there was lots of orange and green, indicating that most government debt was either AAA or slightly below.

Fast forward to today, and the stock of AAA is rapidly shrinking. Furthermore, the stock of debt rated below AA is increasing.

Simply put, government debt is turning rancid.


droog said...

That's good data.

I have not seen a chart as concise as this one for OECD bond yields but everything I read says they are at historic lows. Which suggests we are living in bizarro world or in some sort of depressive spiral. Government debt keeps getting sour, but banks won't invest in anything (the low lending trend Alice just mentioned earlier), which leads lenders to bet on themselves (and wreak more havoc), or park their money in government bonds because comparatively they remain a safe haven. But governments aren't leading growing economies and often their policies aren't helping so their ratings still go down. This entire cycle could be avoided, even though it requires going against a lot of the ruling class who insist of getting things wrong.

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