Debt levels and flows
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Debt level is a measure of how much debt is outstanding. Debt flow is a measure of debt level changes over time. Both are basic
Measuring debt
In measuring debt,
In order to make these
Because GDP is generally quoted with units of currency/year, and debt levels have units of currency, the debt level/GDP ratio has units of years, which may be interpreted as "how many years it would take to repay the debt if all income went to debt repayment". In practice this cannot happen – some of GDP must go to survival – and historically debt repayment rates during periods of repayment have been about 4%–10% of GDP (as in the United States during the Great Depression and World War II),[citation needed] so practical time to repay debt is rather Debt/GDP times 10–25.
Overall levels
Debt levels are worth 3 years of GDP in many countries that have an annual GDP/person above $10,000. Worldwide debt levels are perhaps worth two or three years of GDP.[
$5.7 trillion of gross debt was issued in 2004 according to Thomson Financial numbers, while GDP grew $4 trillion (currency exchange rate). That does not mean that net debt grew faster than GDP on a worldwide average (even if it has done so for years after 2001 in the USA), as debt issuance may be refinancing of existing debt, often "rolling over" debt that comes due into new debt. When debt matures new debt is many times issued to repay the old debt, perhaps from the same creditor. That is one reason why debt issuance far surpasses equity issuance in currency value.
Debt is often issued with a repayment plan (a "time to maturity" in some cases), repayment times may be between a few days (interbank cash flow management) and 50 years or longer (consumer real estate debt). The average repayment time of all worldwide outstanding debt is perhaps[
Equity is another way of financing business, as it has no set time to maturity and pays no set interest. It pays profit from the company it has a claim on.
Accounting
All credit is debt, a liability. Debt is created by lenders and borrowers agreeing to exchange the use of money for the promise to repay. The unit of money lent is the asset of the creditor and the liability of the debtor.
Notes are paper with terms of exchange, hence credits or access to money. All currencies are notes ("This note is legal tender for..."). Money is based on a
The terms of the lending agreement are the key elements of the contractual terms of a promissory note regarding repayment including the amount(s) loaned and to be repaid, loan fees, time value and risk value interest charges, due dates, balloon payments, default terms and more. All material information should be disclosed on financial statements or footnotes.
Flows
2004
Worldwide
Worldwide equity & equity-related issuance totaled $505bn for the year, representing a 29.9% increase over the $389bn raised in 2003. Initial public offerings increased nearly 220%.
2003
Worldwide Debt, Equity and Equity-related issuance reached record-breaking levels with over $5 trillion in proceeds raised, surpassing 2001's record of $4.4 trillion. The $5 trillion of borrowings represented 14% of the GDP flow during the year (4.938/36.3) (see world economy). 93% of the issuance was debt, 7% was equity. Note that these numbers don't include all mortgage borrowing, which was $3.8 trillion in the United States during 2003. $900 billion of it is in mortgage-backed securities, at least $546 billion in US Federal Credit Agency.
Flows
Flows mean issued and sold debt. Debt and equity issuance reported by Thomson Financial ([1]) ($ billions and number of issues).
Worldwide Debt, Equity & Equity-related
- 2004: 5,693 (20,066) (Q4 2004 report)
- 2003: 5,326 (19,706) (Q4 2003 report)
- 2002: 4,257 (?) (Q4 2003 report)
Worldwide Disclosed Fees
- 2004: 15.401 (6,890) (Q4 2004 report)
- 2003: 14.461 (8,023) (Q4 2003 report)
- 2002: 14.762 (6,696) (Q4 2003 report)
Worldwide Equity and Equity-related
- 2004: 505 (3,628) (Q4 2004 report)
- 2003: 388 (2,418) (Q4 2003 report)
- 2002: 319 (?) (Q4 2003 report)
Worldwide Debt
- 2004: 5,187 (16,439) (Q4 2004 report)
- 2003: 4,938 (17,287) (Q4 2003 report)
- 2002: 3,938 (?) (Q4 2003 report)
Worldwide
- 2004: 163 (606) (Q4 2004 report)
- 2003: 146 (524) (Q4 2003 report)
- 2002: 63 (?) (Q4 2003 report)
Worldwide
- 2004: 2,640 (7,147) (Q4 2004 report)
- 2003: 1,966 (?) (Q4 2004 report)
- 2002: ? (?) (Q4 2003 report)
Europe
All Euromarket Issues
- 2003: 1,397 (3,568) (Q4 2003 report)
- 2002: 877 (2715) (Q4 2002 report)
European Leveraged Loans
- 2003: 107 (222) (Q4 2003 report)
- 2002: ? (?) (Q4 2002 report)
United States
US
- 2003: 659 (1,868) (Q4 2003 report)
- 2002: 549 (?) (Q4 2003 report)
All
- 2003: 1,191 (13,152) (Q4 2003 report)
- 2003: 923 (?) (Q4 2003 report)
- 2003: 900 (1,203) (Q4 2003 report)
- 2002: 805 (?) (Q4 2003 report)
- 2003: 581 (1,175) (Q4 2003 report)
- 2002: 456 (?) (Q4 2003 report)
US
- 2003: 980 (2,962) (Q4 2003 report)
- 2002: 1,051 (?) (Q4 2003 report)
- 2003: 368 (1,549) (Q4 2003 report)
- 2002: 344 (?) (Q4 2003 report)
Levels
Levels mean market or balance sheet liability of borrowing party (or asset of lending party) value. Numbers are end-of-year levels, unless otherwise stated.
Euro area
Credit market debt
- 2003: ?
Households
- 2004: 86% of households’ gross disposable income[1]
Non-financial corporations
- 2003: 78.9% of GDP
Government
- 2003: 70.7% of GDP
Japan
Credit market debt
- 2003: ?
Households
- 2003: 110.5% of households’ gross disposable income
Non-financial corporations
- 2003: 110.5% of GDP
Government
- 2003: 141.3% of GDP
United States
Dollar amounts are debt owed by each sector (amounts borrowed by each sector)
Credit market debt
- 2008/Q1: $49.6 trillion (349% of GDP) [2]
Household sector
- 2008/Q1: $13,959.9 billion (99% of GDP) (% of "households’ gross disposable income") [3]
Domestic Financial sectors
- 2008/Q1: $15.9 trillion (112% of GDP)
Nonfinancial corporate business
- 2008/Q1: $6.474 trillion (46% of GDP "Non-financial corporations")
Nonfarm noncorporate business
- 2003: $2.241 trillion
Farm business
- 2003: $208 billion
Government
- 2008/Q1: $7.470 trillion (52.6% of GDP "Government")
Federal government
- 2008/Q1: $5.244 trillion
State and local governments
- 2008/Q1: $2.226 trillion
See also
- Bond (finance)
- Bond market
- Economic bubble
- credit)
- credit market)
- Equity market
- Fixed income
- Government debt
- Securitization
- Structured finance
- World economy
Specific:
- Eurodad
- Thomson Financial league tables
References
- ^ Laura Rinaldi and Alicia Sanchis-Arellano (2006-01-01). "Working Paper Series No. 570 (page 8)" (PDF). European Central Bank. Retrieved 2007-02-25.
- ^ "Flow of Funds Accounts of the United States" (PDF). Federal Reserve. 2006-09-19. Retrieved 2007-02-05.
- ^ "Flow of Funds Accounts of the United States" (PDF). Federal Reserve. 2008-06-15. Archived from the original (PDF) on 2017-11-01. Retrieved 2008-08-10.