In 2016, global debt totaled $164 trillion, which was equivalent to 225 percent of the world’s gross domestic product, according to the I.M.F. In 2009, global debt was 213 percent of G.D.P.
The big question: What has taking on all the extra debt achieved? A surge in government borrowing has helped countries provide a safety net for their citizens and stimulate their economies after the financial crisis a decade ago. In some large countries, like China, private debt also ballooned, in theory, fueling companies’ expansion plans.
But borrowing can become a problem if debt keeps rising as a percentage of a country’s gross domestic product. And in many large economies, such an increase is occurring.
We used the I.M.F. database to measure the change in debt levels at six countries from 2006 until 2016, and then, using other I.M.F. statistics, we looked at their average G.D.P. growth in that decade. Notably, average growth in that period was slower than in the preceding 10 years, sometimes by a lot. The slowdowns were no doubt largely due to the negative impact of the financial crisis. But this exercise may also show that the added debt has failed to sufficiently stimulate the economies – and problems may lie ahead.
This can be seen in the United States. The I.M.F.’s debt database shows government debt was 107 percent of G.D.P. in 2016, up 43 percentage points from 64 percent of G.D.P. in 2006. Private debt fell as a percentage of G.D.P. by two percentage points over that period. Annual growth in inflation-adjusted G.D.P. averaged 1.37 percent from 2006 until 2016, well below the 3.3 percent in the preceding decade. The challenge: The recent tax cuts, which have forced the federal government to borrow more, has to rev up the economy and soon to make the new debt less burdensome.
China looks different but not necessarily better. In China, it was private debt that soared, rising to 193 percent of G.D.P. at the end of 2016, from 106 percent at the end of 2006. Government debt rose by 19 percentage points over that period, but at 44 percent of G.D.P. in 2016, it was at a lower level than in other large economies. Somewhat encouragingly for China, the added debt was not accompanied by a large reduction in G.D.P. growth. In the 10 years ending in 2016, China’s economy grew at an average annual rate of 8.97 percent, down from 9.45 percent in the preceding ten years.
The challenge: Much of the increase private debt may have been invested in unproductive projects that drag down future growth.
How about Europe? France does not appear to be in a promising position. From 2006 until 2016, both private and government debt as a percentage of G.D.P. went up more than 30 percentage points. Private debt ended 2016 at 231 percent of G.D.P. and government borrowing at 97 percent. And France’s average annual G.D.P. growth over that period was 0.76 percent, compared with 2.38 percent over the preceding 10 years. But Germany is a notable outlier in this exercise. Its private debt actually fell, to 148 percent of G.D.P. in 2016 from 163 percent in 2006. Its government debt was only slightly higher. Germany’s G.D.P. growth averaged 1.29 percent from 2006 until 2016, down slightly from a 1.53 percent average in the preceding 10 years. The challenge: Germany’s growth rate has accelerated since 2016, but maybe it should think about borrowing more to get its long-term rate growth higher.
And then there’s Japan: In 2016, the country’s government debt was equivalent to 236 percent of the G.D.P., a far higher level than existed at other countries. The metric had also risen 59 percentage points from 2006 until 2016. Over that period, Japan’s economy grew on average at just 0.54 percent, about half the rate of the preceding 10 years. But all is not lost. With the yield on its 10-year bond at 0.04 percent, the Japanese government pays almost nothing to borrow.
— Peter Eavis
David Tepper is set to be the N.F.L.’s newest team owner
The hedge fund titan, who heads Appaloosa Management, is expected to sign a deal on Tuesday where he will pay $2.2 billion for the Carolina Panthers, according to the NYT, The Charlotte Observer and ESPN’s Adam Schefter. The acquisition would need to be approved by existing N.F.L. owners at their next meeting, which is scheduled for next week.
More from Katherine Peralta, Rick Rothacker, Jourdan Rodrigue and Joseph Person of the Observer:
Tepper, 60, is the richest of the known bidders who sought to buy the Panthers, with a net worth of $11 billion, according to Forbes. He’s also the only known bidder already vetted by the NFL, as he is part-owner of his hometown team, the Pittsburgh Steelers.
Several key details about Tepper’s deal remain unknown, including whether he will have any minority partners, what he plans to do with Bank of America Stadium and permanent seal license (PSL) owners, whether he will move to Charlotte and what his staffing plans are. A spokesman for Tepper declined to comment.
— Michael de la Merced
Don’t count on Verizon to bid for CBS or Fox
While AT&T is trying to buy Time Warner, its biggest rival is pursuing a different path — a strategy Verizon is apparently sticking with despite flirting with CBS and 21st Century Fox.
Here’s what Verizon’s C.E.O., Lowell McAdam, told David Faber of CNBC on Tuesday morning:
Look, I can just say that we have looked at these assets over the period of time. We’ve made the decision that digital is the way for us to go. We have no interest in a linear content company.
People briefed on the matter told me that Mr. McAdam was the C.E.O. alluded to in this passage from CBS’s lawsuit against its controlling shareholder, Shari Redstone:
Ms. Redstone told the C.E.O. of a potential acquirer of CBS that he should not make such an offer, thereby depriving CBS stockholders of a potentially value-enhancing opportunity that the board or the special committee should have been free to evaluate.
Verizon was also said to have been sniffing around Fox assets at the same time that Walt Disney and Comcast were, though it quickly dropped out.
— Michael de la Merced
Apple’s Tim Cook talks tariffs, taxes, immigration and Apple Music
Apple’s chief executive sat down for a discussion with David Rubenstein on Bloomberg Television. The interview will air in June, but here are some of the points he hit on, via Bloomberg:
On the United States’ previous trade policies toward China and President Trump’s plan for tariffs: “It’s true, undoubtedly true, that not everyone has been advantaged from that — in either country — and we’ve got to work on that. But I felt that tariffs were not the right approach there, and I showed him some more analytical kinds of things to demonstrate why.”
On the Dreamers: Mr. Cook said he urged President Trump to find a solution for the undocumented immigrants who were brought to the United States as children. “We’re only one ruling away from a catastrophic case there,” Cook said.
On taxes and buybacks: “We’re also going to buy some of our stock because we view our stock as a good value. It’s good for the economy as well because if people sell stock they pay taxes on their gains.”
On Apple Music and its services business: Mr. Cook said that the Apple Music streaming service now has more than 50 million users. That still trails Spotify, which has 75 million paying subscribers. As for television and movie content, Mr. Cook said: “We are very interested in the content business. We will be playing in a way that is consistent with our brand. We’re not ready to give any details on it yet. But it’s clearly an area of interest.”
The yield on the 10-year is back above 3 percent.
The yield on the benchmark 10-year Treasury bond rose to its highest level in seven years, throwing the recent stock market rally in doubt.
The Dow Jones industrial average and the S.&P. 500 are down 0.7 percent in recent trading. If the Dow finishes down, it would end an eight-session rally that was its longest since September.
The yield on the 10-year Treasury recently hit 3.06 percent. The yield first surpassed 3 percent last month.
With interest rates at historic lows in recent years, investors pushed into riskier assets like stocks in search of better returns. The concern for investors is that higher yields could make riskier assets like stocks less attractive.
Could Remington be reborn as a model for gun control?
As the gun maker nears the end of its bankruptcy proceedings, Andrew asks if some investor could work with its creditors to buy the company — and turn it into an exemplar of safer firearms policies.
From his latest column:
What would happen, for instance, if a consortium were to come together so that the banks offered the buyer a below-market loan, giving a socially responsible investor the advantage of a lower cost of capital? What would happen if one of the big retail chains like Walmart and Dick’s — both of which have already established that they only want to sell guns in a responsible way — were to guarantee distribution, sales and marketing support?
The challenge: Who would have the courage to stand up to the N.R.A. and pro-gun government officials?
Spotted at the Robin Hood Foundation gala
We saw Bill and Melinda Gates, Ray Dalio, Marc Benioff, Oprah Winfrey, Jerry Seinfeld, Steve Cohen and Bill Ackman.
How much did it raise over all? That’s unclear, though Bloomberg notes that it raised $15 million in minutes. (The PepsiCo Foundation alone pledged $4 million.)
More from Amanda Gordon of Bloomberg:
Jennifer Lopez sang “Jenny from the Block,” an anthem about not forgetting one’s humble origins, after taking off a plush white coat, and [Paul Tudor] Jones, in his Robin Hood get-up, crooned “He Ain’t Heavy, He’s My Brother,” by the Hollies. The lyrics are about treating “anyone that holds their hand out for help like they’re family,” he said. “If you think of poor people as the others, they can never be your sister or your brother.”
— Michael de la Merced
Uber eliminates forced arbitration for sex misconduct claims
It’s a major step by the ride-hailing giant’s new management team, one long demanded by critics. What it means:
• The company won’t require arbitration for claims of sexual assault or harassment by riders, drivers or employees.
• Any settlements won’t limit what people can say about their experience.
“Our message to the world is that we need to turn the lights on,” Tony West, Uber’s chief legal officer, wrote in a blog post.
What CBS’s declaration of war against Shari Redstone means
In suing Ms. Redstone to preserve the independence of his board, Les Moonves may have put his job as CBS’s C.E.O. on the line. If the lawsuit fails, Ms. Redstone could replace directors and installing a new chieftain. (Whether she would is another matter.)
CBS believes it can win in Delaware’s Court of Chancery, and that it has a good chance of ultimately issuing a special dividend that would dilute the Redstones’ voting stake from 79 percent to 17 percent. Ms. Redstone is equally sure that the courts won’t let that happen to a controlling shareholder with clear rights.
The context: CBS and Viacom had been making progress in merger negotiations. But they were still far apart on management of the combined company.
Of note: One of the plaintiffs in CBS’s lawsuit is Martha Minow, the former Harvard Law School dean whom Ms. Redstone placed on the board last year.
Critics’ corner: It’s a clash of egos, says Jennifer Saba of Breakingviews. Investors have reason to celebrate (unless the company’s gambit fails), argues Elizabeth Winkler of Heard on the Street. Mr. Moonves might be making a huge mistake, writes Tara Lachapelle of Bloomberg Opinion.
Elsewhere in deals: Fujifilm won’t sweeten its bid for Xerox; here’s how Carl Icahn beat it. Sears is exploring a potential sale of assets. Two Canadian medical marijuana companies agreed a $2.5 billion merger.
The political flyaround
• Moguls like Paul Singer of Elliott Management and Ken Griffin of Citadel have reportedly cut donations to Republicans because of the tax overhaul treats hedge funds. (CNN)
• How Michael Cohen shed light on the “shadow lobbying” industry. (FT)
• The Trump administration defended its revised plans to lower drug prices, which critics say would have little effect. (NYT)
• Ben Bernanke and Stanley Fischer are among the Fed alumni who support appointing Richard Clarida as No. 2 there. Another Fed nominee, Michelle Bowman, plans to criticize postcrisis banking regulations at her Senate confirmation hearing.
• Senators led by Susan Collins of Maine introduced a bill to halt tariffs on Canadian paper imports. (Bloomberg)
• The White House and the E.P.A. blocked publication of a study on the effects of water contamination. The E.P.A.’s internal watchdog said that Scott Pruitt demanded a 24-hour security detail from Day 1.
ZTE shows Trump’s swing away from trade hard-liners
Now we know why President Trump offered to save the Chinese telecom company: to convince China to lift restrictions on U.S. agricultural exports. That’s counter to the approach favored by the likes of Peter Navarro, a trade adviser, and the U.S. trade representative, Bob Lighthizer.
It also reportedly reflects a loss of influence for Commerce Secretary Wilbur Ross, whose department Mr. Trump directed to explore alternatives to ZTE sanctions.
Other potential winners from the move: Qualcomm, whose takeover of NXP Semiconductors will be reviewed again by Chinese regulators, and JPMorgan Chase, which hopes to expand in China.
Elsewhere in trade: Senators dropped a plan for national security reviews of outbound investments by U.S. companies.
What’s next for sports gambling
After the Supreme Court legalized a line of business already estimated to bring in $150 billion of bets each year, a swath of industries is figuring out how to cash in.
Tom Rogers, the chairman of the mobile sports betting start-up WinView (and former TiVo C.E.O.), told Michael that broadcasters like ESPN could use online betting to bolster falling ratings:
Those players are the ones hurting and are dealing with declining metrics. This provides a possible opportunity. We’ll be talking with them.
Other potential winners: Sports leagues. States like New Jersey. And DraftKings and FanDuel, obviously. (Buy Lex recommends shorting the mafia.)
Interpreting the Goldman trading shake-up
At the Wall Street giant’s fabled securities division, two of the three top executives, Pablo Salame and Isabelle Ealet, are preparing to retire. It’s a sign of how the operation has struggled — and how the bank’s power center continues to tilt away from trading.
Sarah Butcher of eFinancialcareers had a more acerbic take:
For a firm which likes to clear out its bottom 5 percent of performers annually, Goldman seemed strangely wedded to its underperforming senior partners.
Elsewhere in finance: Hedge fund moguls like Dan Loeb love the Robin Hood Foundation, but it has backed nonprofits that have protested their industry. The former head of JPMorgan Chase’s blockchain team, Amber Baldet, has unveiled a blockchain start-up, Clovyr.
The tech flyaround
• Under pressure from Amazon, Seattle scaled back its forthcoming tax on big businesses. Under pressure from employees, the company agreed to a rule to improve its board’s diversity. It’s also testing an advertising tool to challenge Google.
• WhatsApp is playing a central role in India’s elections. (NYT)
• After Cambridge Analytica and Europe’s new privacy rules, some advertisers are questioning Facebook’s value to them. And the company’s investigation into data privacy abuses has blocked some 200 apps.
• Tesla reportedly rejected a plan to give its Autopilot feature sensors to check drivers were paying attention. The company said it would “flatten” its management structure.
• New Enterprise Associates is reportedly planning to sell roughly $1 billion worth of stakes in start-ups to a new venture firm it would create. (WSJ)
• Bill O’Reilly is reportedly in advanced talks to return to TV — at Newsmax. (Page Six)
• Vittorio Colao, Vodafone’s C.E.O. for a decade, plans to step down in October, after engineering its $22 billion Liberty Global deal. (Bloomberg)
• Ted Eliopoulos, chief investment officer of the Calpers public pension fund and the architect of its move away from hedge funds, plans to retire at year end to move to New York for family reasons. (Institutional Investor)
• Two directors at Wynn Resorts, John Hagenbuch and Robert Miller, have resigned. (Bloomberg)
The speed read
• A U.S. federal judge looks likely to award the Justice Department a $250 million yacht. It’s owned by Low Taek Jho, a Malaysian financier caught up in the 1MDB scandal. (Bloomberg)
• The best-paid C.E.O.s don’t necessarily run the best-performing companies. (WSJ)
• Can robots help both employers and employees? In some industries, probably yes. (WSJ)
• Royal Dutch Shell’s takeover of an English energy start-up shows how oil giants are remaking themselves. (NYT)
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