Global Debt

Debt is used to finance and pay for undertakings and business around the world. Debt levels are worth 3 years of GDP in many countries that have an annual GDP/person above $10,000. Global debt levels are perhaps worth two or three years of GDP. GDP (at currency exchange rate) was $40 trillion during 2004. Debt levels may therefore be about $100 trillion.

Global Debt

Debt is used to finance and pay for undertakings and business around the world. Debt levels are worth 3 years of GDP in many countries that have an annual GDP/person above $10,000. Global debt levels are perhaps worth two or three years of GDP. GDP (at currency exchange rate) was $40 trillion during 2004. Debt levels may therefore be about $100 trillion.

$5.7 trillion of debt was issued in 2004 according to Thomson Financial numbers, while GDP grew $4 trillion (currency exchange rate). That does not mean that debt grew faster than GDP on a global average (even if it has done so for years after 2001 in the USA). Debt is often issued with a repayment plan (a "time to maturity" in some cases), repayment times may be between a few days (interbank cash flow management) and 50 years or longer (consumer real estate debt). The avereage repayment time of all global outstanding debt is perhaps 10 years.

When debt matures new debt is many times issued to repay the old debt, perhaps from the same creditor. That is one reason why debt issuance far surpasses equity issuance in currency value. Equity is another way of financing business, as it has no set time to maturity and pays no set interest. It pays profit from the company it is a claim on.
Contents:
1 Accounting
2 Flows

Accounting

$1 of debt is booked as $1 of debt on two balance sheets, at the creditor and debtor. Almost all debt held by "legal persons" is accounted for on balance sheets for taxation purposes. Many governments also keep balance sheets of "natural" persons.

Flows

2004

Global debt and equity underwriting reached a record $5.69 trillion. Global debt underwriting grew 4.3% year-over-year to $5.19 trillion. Syndicated lending was up 34.3% year-over-year. Global high-yield corporate debt climbed to over $163 billion eclipsing the previous record of $150 billion set in 1998. US Assset-backed securities volume increased 41.7% to $857 billion.

Global equity & equity-related issuance totaled $505bn for the year, representing a 29.9% increase over the $389bn raised in 2003. Initial public offerings increased nearly 220%.

2003

Global Debt, Equity and Equity-related issuance reached record-breaking levels with over $5 trillion in proceeds raised, surpassing 2001ís record of $4.4 trillion. The $5 trillion of borrowings represented 14% of the GDP flow during the year (4.938/36.3) (see world economy). 93% of the issuance was debt, 7% was equity. Note that these numbers don't include all mortgage borrowing, which was $3.8 trillion in the United States during 2003. $900 billion of it is in mortgage-backed securities, at least $546 billion in US Federal Credit Agency.

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