At 9.39am today – according to the Economist – total global government debt stood at USD$40455754305252. That’s 40 trillion dollars… and counting.
According to the Age:
“The [China Investment Corporation (CIC)] has about $US100 billion at its disposal to spend abroad.”
That’s a lot of cash. But big numbers can be deceptive. A hundred billion 40 trillion… what’s the big difference? Well we’ll show you the difference…
If the CIC invests its USD$100 billion in government debt it will buy just 0.247% of the world’s outstanding debt… and shrinking. Because as every second passes and the debt rises China’s hundred billion dollars has less of an impact.
[Ed note: at 11.17am global debt has risen by nearly USD$2 billion… in less than two hours!]
But that’s not all. Even if the CIC spends every cent of its billions on Spanish Italian and French government debt do you know how much debt it could buy? Get this… it will still only account for 1.9% of all outstanding Spanish Italian and French debt.
And with Spanish Italian and French debt yielding 5.27% 5.78% and 3.04% China’s investment won’t even cover the annual interest bill.
Besides we’re not convinced China has any desire to dump one crappy asset (U.S. dollars) to buy another crappy asset (Euros). But we’ll see. What we do know is China’s expected debt buying spree is not the answer to the world’s debt problems.