There’s Not Enough Debt in the World

It may be a cliché, but it’s true that the world’s awash in debt. In its quarterly update, the Institute of International Finance said on Tuesday that the world’s debt pile is hovering near a record at $244 trillion, which is more than three times the size of the global economy. Scary numbers, to be sure, but they didn’t stop one of the world’s most indebted and politically unstable countries from selling more than $11 billion of bonds without breaking a sweat.

As proof, Italy was set to price 10 billion euros of notes to yield 18 basis points above benchmark rates, less than the 22 basis-point spread they were initially marketed, according to Bloomberg News. A spokesman for Italy’s debt agency confirmed that investors placed orders for 35.5 billion euros of the debt, and while such numbers should be viewed skeptically, the shrinking spread confirms there was high demand despite Italy wrestling with a debt-to-GDP ratio of more than 130 percent — the highest in the euro area after Greece, according to Bloomberg News. So while the world is awash in debt, it’s also awash in excess liquidity resulting from an almost decade’s worth of extraordinary monetary policies by top central banks. The collective balance-sheet assets of the Federal Reserve, European Central Bank, Bank of Japan and Bank of England, which grew steadily from less than 20 percent of their countries’ total GDP in 2011 to as high as 37.2 percent last February, has only eased to 36.6 percent despite the Fed’s efforts to shrink its assets over the last year or so, data compiled by Bloomberg show.