In a study done by Hayman Advisors in Dallas, Texas, the prospect that there simply isn't enough cash available to cover this mind-boggling sum arose, and it still hasn't been answered.
While the US carries the most burden in this debt issuance conundrum, Japan, the UK, France, Germany, China, and other major economies are saddled with massive figures as well.
With a global GDP of $60 trillion, we need close to 9% of world GDP. This is a staggering figure, approximately equal to the GDP of Japan, or five times that of Australia (give or take a few hundred billion).
Here's a list of the new (additional) sovereign debt amounts that need to be issued on a country-by-country basis in 2009, in billions of dollars:
- USA - $3,018
- Japan - $536
- UK - $319
- Germany - $ 190
- France - $166
- China - $132
- Spain - $120
- India - $117
- Russia - $107
- Italy - $95
- Canada - $69
- Brazil - $53
- Mexico - $22
- Rest of the world - $421
- Total - $5.3 trillion
All of a sudden it kind of makes Paulson's $700 billion economic relief fund from last year look like lunch money.
So let's get down to the question at hand: Where will all this money come from?
The first few sources are laughable, especially in the US: Household savings, leverage available to banks, and available cash.
Others include corporate savings, capital inflows, and real estate debt, as listed out by Hayman Advisors.
But no matter how you add these up, the numbers don't look promising. Let's just say Americans (and the rest of the world for that matter) got their personal finances in order and started saving more. These extra funds would appear to help, but they would also reduce consumer spending and GDP, possibly even creating even more unemployment.
How about a reduction in corporate borrowing? Well then companies couldn't grow, and markets would drop right along with GDP.
No matter which way you slice it, we're in trouble. But if it's any consolation to the Americans, so is the rest of the world. (Which just means we can't rely on 'them' to bail us out).
Vladimir Gonzales, EconomyWatch.com