This post was most recently updated on December 2nd, 2019
The global debt will reach a record of $255 trillion by the end of the year. That is $34,000 debt for each of the 7.5 billion people on the earth planet.
This data according to a report released by the International Institute of Finance (IIF) on Thursday adding that by the end of the year the global debt will surpass $255 trillion.
The report shows that the global debt surged by $7.5 trillion only in the first half of 2019.
China and the United States are responsible for 60% of the increase of the global debt this year, as borrowing surged this year in the two countries according to the report.
“China and the U.S. accounted for over 60% of the increase. Similarly, EM debt also hit a new record of $71.4 trillion (220% of GDP). With few signs of a slowdown in the pace of debt accumulation, we estimate that global debt will surpass $255 trillion this year,” the IIF said in the report.
The growing of the global debt has been raising investor concerns and many financial analysts and economist fear that our economy has come to a breaking point. Interest rates at historic low rates make easy for corporate and governments to bowwow money.
“However, with diminishing scope for further monetary easing in many parts of the world, countries with high levels of government debt (Italy, Lebanon) — as well as those where government debt is growing rapidly (Argentina, Brazil, South Africa, and Greece) — may find it harder to turn to fiscal stimulus,” the IIF report stated.
The International Monetary Fund (IMF) has also issued several warnings about high-risk corporate debt pointing that nearly 40% of the corporate debt which is nearly 19 trillion in economies like U.S China Japan Germany, France Britain, Italy, and Spain is at risk of default in an eventual global crisis scenario.
Jerome Powell, Chair of the Federal Reserve seems not to be concerned about the rising debt when he says that there is no sign of bubbles in the economy.
“If you look at today’s economy, there’s nothing that’s really booming now that would want to bust,” Powell said in testimony before the House Budget Committee. “In other words, it’s a pretty sustainable picture.”
However, the IIF report shows another picture with the global debt raising faster.
“The big increase in global debt over the past decade — over $70 trillion — has been driven mainly by governments and the non-financial corporate sector (each up by some $27 trillion). For mature markets, the rise has mainly been in general government debt (up $17 trillion to over $52 trillion). However, for emerging markets, the bulk of the rise has been in non-financial corporate debt (up $20 trillion to over $30 trillion).”
The IIF refers to the extending of world bond markets as the main reason for this debt increase. The world bond markets expanded from $87 trillion in 2009 to over $115 trillion in mid-2019. The raise was caused mostly bt the government bond market, which currently makes up 47% of worldwide bond markets 7% more compared with 40% in 2009.
“The security universe has become most quickly in developing markets, expanding by over $17 trillion to approach $28 trillion since 2009,” the IIF report stated.
Amid concerns about Brexit, the global slowdown of the economy and President Trump’s impeachment inquiry, the global bond market has been expanding especially safe-haven assets like U.S. Treasurys which have seen a rush from investors in these times of economic uncertainty.
With all this massive debt growing constantly seems that our financial system has gone mad. Maybe it is time for a plan B to fix this broken system were bankes play their financial games and taxpayers pay the consequences.
Long bitcoin and short the bankes.
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