> Andrew Smithers, who runs Smithers & Company, an economic > consulting firm in London, offered one way to judge the > size of off-balance-sheet debts: look at total debt in the > financial sector, which has been rising faster in recent > years than that of businesses and households. As recently > as 1996, financial debt amounted to 32 percent of total > debt in the private sector. Now it stands at 36 percent. > > Some financial debt is household obligations, like > automobile leases, Mr. Smithers said. But he thinks most of > it represents off-balance- sheet debts of corporations. > > "U.S. companies are already highly leveraged," he said. "It > is unlikely that they could take on balance sheet much of > their off-balance-sheet debt without many companies being > in breach of their debt covenants." If, for example, just > half of all financial debt were moved onto corporate > balance sheets, the leverage would jump to 163 percent of > companies' net worth, based on replacement cost of assets, > Mr. Smithers said. > If the personal, the financial and the corporate sector are all net debtors and increasingly so, who holds the corresponding credit balances? Is it: 1. The state sector due to a budget surplus? 2. The overseas sector due to a trade deficit? -- Paul Cockshott, University of Glasgow, Glasgow, Scotland 0141 330 3125 mobile:07946 476966 paul@cockshott.com http://www.dcs.gla.ac.uk/people/personal/wpc/ http://www.dcs.gla.ac.uk/~wpc/reports/index.html
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