Last week, we reported on the mess in the European banking system, asking the question: could big European banks drag down the world economy? Big banks in Europe have piled up debt just like the rest of the world. But an article in Bloomberg reveals big banks in countries like Germany, Switzerland and France may be in even worse shape than we think. There are indications that European banks are using a Lehman Brothers-style trick to disguise their actual levels of debt.
The US national debt was in the news last week as Pres. Trump signed a spending bill that raised the debt ceiling limit for the next three months and added approximately $318 billion to the national debt. Officially, the US debt surged to to $20.16 trillion. Of course, the actual figure for government unfunded liabilities runs even higher. And Trump wants to do away with the debt ceiling altogether.
The US debt makes up just one part of a rapidly growing worldwide debt problem. Earlier this summer, US Global Investors CEO Frank Holmes called global debt “the mother of all bubbles.” Now we have a report from the Bank of International Settlements saying worldwide debt may actually be understated by $13 trillion. Reuters reports the understatement is because “traditional accounting practices exclude foreign exchange derivatives used to hedge international trade and foreign currency bonds.”