Euro Countries Become Euro Zone
Like we discussed here last weekend, it was just a matter of time until the Eurozone announced their bail out for Greece. We got the announcement that they would be saved this week.
It is now safe to assume that with the Greek bail out every country will be bailed out down the line. That means that Portugal, Spain, Italy, etc., do not need to worry about cutting cost or balancing budgets.
This is important news because the eurozone can now be considered one large bankrupt union just like the United States.
This year alone the Eurozone will need to finance, fund, and rollover deficits to the tune of $1.6 trillion as can be seen from the chart below: (red box shows totals, and you can click on charts if they are too small to read)
So of course this begs the next question; If the United States needs to finance $1.7 trillion this year, the Eurozone needs to finance $1.3 trillion this year, and Japan is facing a funding crisis as well, who is going to buy all the debt to keep the global governments solvent?
Can China buy this much debt? Not a chance. Under the best case scenario they could fund about $500 billion in global government debt. This assumes that they want to; all recent data shows China cutting back drastically on their government debt purchases.
Before we answer who will purchase the debt, let's talk a little more about the USA.......
It is now safe to assume that with the Greek bail out every country will be bailed out down the line. That means that Portugal, Spain, Italy, etc., do not need to worry about cutting cost or balancing budgets.
This is important news because the eurozone can now be considered one large bankrupt union just like the United States.
This year alone the Eurozone will need to finance, fund, and rollover deficits to the tune of $1.6 trillion as can be seen from the chart below: (red box shows totals, and you can click on charts if they are too small to read)
So of course this begs the next question; If the United States needs to finance $1.7 trillion this year, the Eurozone needs to finance $1.3 trillion this year, and Japan is facing a funding crisis as well, who is going to buy all the debt to keep the global governments solvent?
Can China buy this much debt? Not a chance. Under the best case scenario they could fund about $500 billion in global government debt. This assumes that they want to; all recent data shows China cutting back drastically on their government debt purchases.
Before we answer who will purchase the debt, let's talk a little more about the USA.......
Comments
Post a Comment