by Ambrose Evans-Pritchard: It
Is Japan We Should Be Worrying About, NotAmerica
In a report
entitled "Worst-case debt scenario", the bank’s asset
team said state rescue packages over the last year have merely transferred
private liabilities onto sagging sovereign shoulders, creating a
fresh set of problems.
is still far too high in almost all rich economies as a share of
GDP (350pc in the US), whether public or private. It must be reduced
by the hard slog of "deleveraging", for years.
nobody can say with any certainty whether we have in fact escaped
the prospect of a global economic collapse," said the 68-page
report, headed by asset chief Daniel Fermon. It is an exploration
of the dangers, not a forecast.
Under the French
bank’s "Bear Case" scenario (the gloomiest of three possible
outcomes), the dollar would slide further and global equities would
retest the March lows. Property prices would tumble again. Oil would
fall back to $50 in 2010.
have already shot their fiscal bolts. Even without fresh spending,
public debt would explode within two years to 105pc of GDP in the
UK, 125pc in the US and the eurozone, and 270pc in Japan. Worldwide
state debt would reach $45 trillion, up two-and-a-half times in
look low because debt started from a low base. Mr Ferman said the
UK would converge with Europe at 130pc of GDP by 2015 under the
debt burden is greater than it was after the Second World War, when
nominal levels looked similar. Ageing populations will make it harder
to erode debt through growth. "High public debt looks entirely
unsustainable in the long run. We have almost reached a point of
no return for government debt," it said.