Debt levels and flows Totally Explained

Everything about Global Debt totally explained

Debt is used to finance and pay for undertakings and business around the world. Debt levels are worth 3 years of GDP in many countries that have an annual GDP/person above $10,000. Global debt levels are perhaps worth two or three years of GDP. GDP (at currency exchange rate) was $40 trillion during 2004. Debt levels may therefore be about $100 trillion.
$5.7 trillion of debt was issued in 2004 according to Thomson Financial numbers, while GDP grew $4 trillion (currency exchange rate). That doesn't mean that debt grew faster than GDP on a global average (even if it has done so for years after 2001 in the USA). 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 global outstanding debt is perhaps 10 years.
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. 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's 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 fiat whereupon all agree upon the exchange values of similar pieces of paper. This extends to savings and checking accounts which are depository receipts for money loaned to bankers who in turn lend it to other borrowers. And thus it multiplies, a deposit becomes a loan that becomes another deposit and so on.
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

Global debt and equity underwriting reached a record $5.69 trillion. Global debt underwriting grew 4.3% year-over-year to $5.19 trillion. Syndicated lending was up 34.3% year-over-year. Global high-yield corporate debt climbed to over $163 billion eclipsing the previous record of $150 billion set in 1998. US Asset-backed securities volume increased 41.7% to $857 billion.
Global 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

Global 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's 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 ((External Link

)) ($ billions and number of issues).
Global 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)

Global 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) Global Equity and Equity-related

2004: 505 (3,628) (Q4 2004 report)

2003: 388 (2,418) (Q4 2003 report)

2002: 319 (?) (Q4 2003 report) Global Debt

2004: 5,187 (16,439) (Q4 2004 report)

2003: 4,938 (17,287) (Q4 2003 report)

2002: 3,938 (?) (Q4 2003 report) Global High Yield Corporate Debt

2004: 163 (606) (Q4 2004 report)

2003: 146 (524) (Q4 2003 report)

2002: 63 (?) (Q4 2003 report) Global Loans (syndicated, leveraged)

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 Investment Grade

2003: 659 (1,868) (Q4 2003 report)

2002: 549 (?) (Q4 2003 report) All US Federal Credit Agency Debt. FHLB dominated the agency market in 2003, raising $545.5 billion in proceeds, a 35% increase in volume from 2002.

2003: 1,191 (13,152) (Q4 2003 report)

2003: 923 (?) (Q4 2003 report) US Mortgage-backed Securities

2003: 900 (1,203) (Q4 2003 report)

2002: 805 (?) (Q4 2003 report) US Asset-backed securities

2003: 581 (1,175) (Q4 2003 report)

2002: 456 (?) (Q4 2003 report) US Syndicated Loans

2003: 980 (2,962) (Q4 2003 report)

2002: 1,051 (?) (Q4 2003 report) US Leveraged Loans

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 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

2006/Q2: $42.7 trillion (323% of GDP) Household sector

2006/Q2: $12.4 trillion (94% of GDP) (130% of "households’ gross disposable income") Financial sectors

2003: $11.6 trillion (100% of GDP) Nonfinancial corporate business

2003: $4.973 trillion (67.5% of GDP "Non-financial corporations") (data from ECB) Nonfarm noncorporate business

2003: $2.241 trillion Farm business

2003: $208 billion Government

2003: $5.594 (4.034+1.560) (47.7% of GDP "Government") (data from ECB) Federal government

2003: $4.034 trillion State and local governments

2003: $1.560 trillionFurther Information

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