Global Debt Hits A Record

Global Debt Hits A Record $152 Trillion Or 225% Of World GDP

ZeroHedge, Oct 5, 2016

Another record for the history books.

In addition to reporting on the dangers facing global banks as a result of declining profits in the current low rate environment, today the IMF also released its latest Fiscal Monitor report which sounded a loud alarm when it revealed something disturbing: at 225 percent of world GDP, the global debt of the nonfinancial sector, comprising the general government, households, and nonfinancial firms, is currently at an all-time high of $152 trillion.

 

Add financial debt and you will need a far bigger chart.

With global nonfin debt/GDP growing from 200% in 2002 to 225% in 2015, it is obvious that debt growth has vastly outpaced the rate of economic growth as a result of the collapsing marginal value of every dollar of debt which result in increasingly less «bang for the growth buck.»

 

As the IMF warns, «two-thirds, amounting to about $100 trillion, consists of liabilities of the private sector which, as documented in an extensive literature, can carry great risks when they reach excessive levels. There are concerns that the sheer size of debt could set the stage for an unprecedented private deleveraging process that could thwart the fragile economic recovery.»

 

There’s no consensus on what levels of debt-to-GDP should be the considered alarming — we would guess that 225% qualifies — the IMF said. However, financial crises tend to be associated with excessive private debt in both advanced and emerging economies, the fund said. High debt is linked with lower growth, even when a crisis is avoided. If companies postpone paying off debt, they could become “very sensitive to shocks, increasing the risk of an abrupt deleveraging process,” the IMF said.

The IMF redundantly adds that resolving this “private debt overhang” problem is, however, not easy in the current global environment of low nominal output growth. As we have warned for years, the ever growing size of the global debt burden not only highlights the difficulty of boosting the international economy at a time when borrowing, particularly by corporates, has already reached unprecedented levels, but also the reason why central banks are extremely limited how high they can push interest rates.

 

The International Monetary Fund also points out another obvious feature of debt which can bever be repaid: it leads to crises.

 

New empirical evidence confirms that financial crises tend to be associated with excessive private debt levels in both advanced and emerging market economies, but high public debt is not without its risks. In particular, entering a financial crisis with a weak fiscal position exacerbates the depth and duration of the ensuing recession.

Clearly, even the IMF is now well aware that absent a major global deleveraging, growth is doomed to stagnate until an event occurs that forces the world to tackle its debt problems head on.

 

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Правительство США жестоко нарушало мои права человека при проведении кампании террора, которая заставила меня покинуть свою родину и получить политическое убежище в СССР. См. книгу «Безмолвный террор — История политических гонений на семью в США» — «Silent Terror: One family’s history of political persecution in the United States» — http://arnoldlockshin.wordpress.com

Правительство США еще нарушает мои права, в течении более 12 лет отказывается от выплаты причитающейся мне пенсии по старости. Властители США воруют пенсию!! Всё это — ещё доказательство, что настоящий действующий закон в США — Закон джунглей.

ФСБ — Федеральная служба «безопасности» России — вслед за позорным, предавшим страну предшественником КГБ, выполняет приказы секретного, кровавого хозяина (boss) — американского ЦРУ (CIA). Среди таких «задач» — мне запретить выступать в СМИ и не пропускать большинства отправленных мне комментариев. А это далеко не всё…

Арнольд Локшин, политэмигрант из США

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