$15.2tn US debt passes 100% of GDP, Greece threatens default

Posted on 04 January 2012 with no comments from readers

Markets started the first day of the New Year with a rally with commodities sharply up too. The ArabianMoney pick of the year silver (click here) was up the most at seven per cent on the day.

But the bad news that got little coverage on a good day for official economic statistics was still there like the unwelcome guest at a party.

100% US debt ratio

The US debt to GDP ratio officially past 100 per cent of GDP for the first time at $15.22 trillion. As Zerohedge reported the world?s largest national economy is only $14 billion away from its own debt ceiling, and that is not a large sum when the total debt is double-figure trillions.

At the same time Greece got tough with negotiators over terms of a $170 billion international bailout deal signalling that it wants a 75 per cent haircut for privately held bonds that mature in March, and will default if that cannot be achieved.

Then perhaps the heightened state of tension in the Hormuz Straits is being overlooked. There are fears of a 1970s-style jump in the price of oil if Iran goes ahead with threats to close the straits should European leaders impose an embargo on Iranian oil exports and freeze Iranian central bank assets by the end of this month.

Oil price rises tend to preceed global economic downturns as we saw with $147 oil in July 2008 just before the global economic crisis of that autumn.

In 1973 the price of oil shot up 400 per cent plunging Western economies into a severe recession and 1974 saw one of the worst downturns ever in major stock markets.

New Year fear

You could almost wonder where the financial markets found their New Year cheer yesterday. It can?t last. The accumulation of negative factors by the end of last year was overwhelming and global trade is already in a slowdown.

There is a horrible logic carrying this forward into 2012 with debts only growing bigger and bigger, Greece close to breaking point and plenty of geo-political problems to unsettle the Middle East and the all important oil price.

Perhaps there is always a tendency to see the bright side of life after a holiday break but only a fool would invest money when feeling over-optimistic.

Source: http://www.arabianmoney.net/gold-silver/2012/01/04/15-2tn-us-debt-passes-100-of-gdp-greece-threatens-default/

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