Here is a look at debt issues across the world

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GLOBALDEBTCRISIS
IMMINENT
By: Paul Young, CPA, CGA
May 21, 2019

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PAULYOUNG - BIO
• CPA, CGA
• Financial Solutions
• SME – Business Process Changes
• SME – Risk Management
• SME – Close, Consolidate and
Reporting
• SME – Public Policy
• SME – Financial Solutions
• SME – Supply Chain Management
• Academia – Advance Accounting,
Public Finance and Advanced
Management Systems
Contact information:
Paul_Young_CGA@Hotmail.com

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• This presentation is one perspective on Debt. It is not the only view. People are more than
welcome to visit other sites like BEA, Stats Canada, OECD, Banks, etc.

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AGENDA
• What is debt
• Types of debt
• Market Forecast
• Government Debt
• Corporate Debt
• Consumer Debt
• Global Forecast / Risk

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WHAT IS DEBT
• Debt is an amount of money borrowed by one party from another. Debt is used by many
corporations and individuals as a method of making large purchases that they could not afford
under normal circumstances. A debt arrangement gives the borrowing party permission to borrow
money under the condition that it is to be paid back at a later date, usually with interest.

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TYPES
DEBT /
SEGMENTS
Corporate/Business
Household Debt
Government

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GLOBAL FORECAST
What drives an Economy?
• Consumer Spending
• Exports
• Government Spending
Source - http://www.scotiabank.com/ca/en/about/global-
economics/economics-publications.html

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GOVERNMENT
DEBT
• Many government have Debt to GDP
ratios 92% or above
• Government Debt (Bonds)
• Yields are based on credit ratings
• Government debt
• Deficits
• New debt financing
(Infrastructure, operating
requirements, etc.)

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CORPORATE
DEBT
• The corporate debt of non-financial firms across major
emerging markets rose sharply from about $4 trillion in
2004 to well over $18 trillion in 2014 - (Source – IMF)
• In the past six years,” the report stated, “the global
economy has enjoyed a benign default environment as
accommodative monetary policies have fueled the
corporate debt market with abundant liquidity, allowing
many low-rated issuers to refinance when needed. The
party is likely coming to an end soon as the global
default rate is expected to approach the historical
average mark by the end of 2016.” The default rate for
all corporate debt is expected to rise to 2.1%, Moody’s
said. That is up from 0.9% in 2014 and 1.7% in 2015. It
also would be the highest default rate since the 2008-
2009 crisis. If the rate is realized, it would translate to
138 defaults this year, up from 109 in 2015 (a 30%
increase) and 55 in 2014. (Source – Moodys)

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HOUSEHOLD DEBT
Source: OECD
Household debt has risen markedly since
the turn of the century and stands at a
historically high level in most OECD
countries.
It examines the vulnerabilities associated
with high household debt for households,
the financial system and the wider economy.
Finally, it describes the challenges faced by
policymakers at the current juncture and
outlines responses in terms of monetary,
micro and macro-prudential, and housing
policies.

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CORPORATE
DEBT
Source -
https://ca.finance.yahoo.com/news/apos-9-
trillion-corporate-debt-122100970.html
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CANADA–
HOUSEHOLD
DEBT
Updated numbers from Statistics Canada showed
that the Canadian household debt-to-disposable-
income ratio stood at 165.3 per cent in Q1 2016,
only slightly below the record-breaking level of
165.4 per cent in the last quarter of 2015. (Source:
Mortgage Broker)
Nearly half of Canadians are within $200 a month of
being unable to pay their bills, according to a MNP
Debt survey. Sadly, this isn’t breaking news.The
report went on to highlight 25 per cent were already
unable to cover their bills and debt payments while
31 per cent said any increase in interest rates could
move them towards bankruptcy. These are disturbing
numbers and yet illustrate just how many Canadians
are living so close to the margin. Source: BNN

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BLOG – GLOBAL DEBT
• We are heading for a serious debt crisis
which is all but ignored by PM Zoolander!
China is rumoring to have at least 5 trillion
of bad debt that would require to be written
down as it is likely in default.
https://www.huffingtonpost.ca/2018/12/10/c
onsumer-insolvencies-canada_a_23614259/
•
• https://www.mauldineconomics.com/frontlin
ethoughts/the-debt-train-will-crash
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GLOBAL DEBT / FX RISK
• Source -
https://www.theglobaltreasurer.com/2019/0
5/16/how-can-treasury-teams-successfully-
manage-foreign-exchange-risk-in-a-
volatile-global-
environment/?utm_source=the-global-
treasurer&utm_medium=email&utm_camp
aign=the-global-treasurer-daily-
dose&utm_content=2019-05-20-fx-in-a-
volatile-environment-bank-exposure-and-
corporate-debt-digital-transaction-volume-
management&mkt_tok=eyJpIjoiTmpJNFpt
VXhZamd6TURJeCIsInQiOiJyb2l3a0hXT
WpDVTNCQjRjMkZtbGRCS2RnUGZSNF
N0ZW9zZnZxRk5zSitrcFhmWlY1dU1Ca
WhDa0RZVEx5OGFHTUtKXC92RG8wN
0dVNHdKNTN6enBRQ0xrclwvR3RGTDZ
5QmZqaHVaRndndjhDXC9rXC82eVZTX
C9JK2VEOWE1bytCblZ4In0%3D
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RISKS
• Cheap Debt cannot last forever
• Hike in mortgage or personal credit
rates
• More consumer default
• Lower Credit rating for government
• Higher bond yields means higher
interest rates and higher debt
coverage