- Global QE Is Coming: Let the Gold Mania Begin!
By Chris Puplava, http://www.financialsense.com/
In my last article I commented on Japan’s coming debt time bomb (Massive Japanese Debt Monetization is Coming, Yen to be Devalued), in which I made the case that Japan had a tremendous amount of their debt maturing over the next three years and that the Bank of Japan was likely to monetize much of it and weaken the Yen as a result. Since then I’ve dug a bit deeper and taken a look at the top 10 debtor nations of the world to see if they too had a large portion of their total outstanding debt maturing in the near future. What I found startled me: Nearly 50% of the total outstanding debt of the world’s top 10 debtor nations needs to be rolled over by the end of 2015.
While fears over a European contagion and a hard landing in China have driven investors into sovereign debt like the U.S. and Japan, how long can this continue and will investor demand for sovereign debt be able to soak up the total supply over the next few years? It is my belief that global central banks will be the buyers of last resort and will be monetizing the debt in massive quantities over the next two and half years. This may perhaps be the catalyst leading to the mania phase for gold as investors all over the world attempt to protect themselves from global quantitative easing and global currency debasement.
The Top 10 Debtor Nations
While the world is currently focused on Spain and Italy as seen by 5-year credit default swap insurance north of 500 basis points (costs $500K annually to protect $10M worth of debt from default), the picture for the other countries that make up the top 10 debtor nations in the world is not much brighter. For example, while Italy has a debt-to-GDP ratio of 120%, Japan takes the top spot with 208%; and while Italy currently has a budget deficit relative to GDP of -3.9%, the US is far worse with a -8.10%. In fact, of the top 10 debtor nations half of them have budget deficits of more than 5% relative to GDP and 7 of the 10 have debt-to-GDP ratios at or exceeding 80%. As the table below highlights, the sovereign debt crisis is not a Euro phenomenon but a GLOBAL issue.
The table below breaks out the total outstanding debt for the world’s top 10 debtor nations and looks at how much comes due by year.