Global debt is fast approaching $244 trillion, three times the size of global economy where most indebted economies are the richer ones. Government debt has now reached about 80% of global GDP while private debt is on the rise as well. Closing the first decade after the global financial crisis, “legacy of excessive debt still looms large.”
Global Debt Skyrocketing: Most Indebted Economies are Richer ones
The world debt pile is only rising while currently hovering around $244 trillion which according to an analysis by the Washington-based Institute of International Finance is three times the size of the global economy.
Despite the stronger pace of economic growth, in the third quarter of last year, the global debt-to-GDP ratio exceeded 318 percent.
Earlier this month, IMF released the new data on global data that has reached an all-time high of $184 trillion in nominal terms which is 225 percent of GDP in 2017. The interesting and not so surprising fact presented by the IMF is “the most indebted economies in the world are also the richer ones.”
“The top three borrowers in the world—the United States, China, and Japan—account for more than half of global debt, exceeding their share of global output.”
The driving force behind the global debt is the private sector’s debt which has tripled since 1950. IMF further reports that since the global financial crisis, rise in private debt in emerging markets which is led by China is overtaking the advanced economies. While the global public debt has been on the reversal which after a steady decline up to the mid-1970s, has gone up since.
Govt. Debt Hitting Record as well
According to the Fitch Ratings, the government debt has now reached about 80% of global GDP by hitting $66 trillion through 2018 end. While developed market debt had remained somewhat stable, US is the exception with its IOU surging by 44 percent.
CNBC stated, “U.S. debt began accelerating at the turn of the 21st century. The total jumped 85 percent to $10.6 trillion during former President George W. Bush’s two terms, another 88 percent to $19.9 trillion under President Barack Obama and has risen 10 percent during the first two years of President Donald Trump’s term.”
James McCormack, Fitch’s global head of sovereign ratings said, “Government debt levels are high, leaving many countries poorly positioned for financial tightening as global interest rates begin to move higher.”
“With financial conditions tightening in many countries, which includes rising interest rates, prospects for bringing debt down remain uncertain. The high levels of corporate and government debt built up over years of easy global financial conditions (…) constitute a potential fault line,” wrote IMF.
Closing the first decade after the global financial crisis, IMF cautioned, “legacy of excessive debt still looms large.”
What will be the answer to this? Crypto enthusiasts will say Bitcoin as did this one, “No doubt Bitcoin will be the gold standard in a world where total debt of the world is overtaking the total global.” And as the recent report by Lucid Investment Strategies says that Bitcoin can reach mass adoption and provide a permanent fix to the debt crisis. For this, it states, Bitcoin has to climb to $10 million as at that level, “Bitcoin would provide a sufficient reserve to alleviate the world debt burden.”