by Chris Becker
Just in time for the New Year crash, here comes some stellar news from the IMF (my emphasis added):
- Global debt has reached an all-time high of $184 trillion in nominal terms, the equivalent of 225 percent of GDP in 2017. On average, the world’s debt now exceeds $86,000 in per capita terms, which is more than 2½ times the average income per-capita.
- 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 private sector’s debt has tripled since 1950. This makes it the driving force behind global debt. Another change since the global financial crisis has been the rise in private debt in emerging markets, led by China, overtaking advanced economies. At the other end of the spectrum, private debt has remained very low in low-income developing countries.
- Global public debt, on the other hand, has experienced a reversal of sorts. After a steady decline up to the mid-1970s, public debt has gone up since, with advanced economies at the helm and, of late, followed by emerging and low-income developing countries.
Here’s the even better news, the GFC peak in debt has been surpassed and then some, over 11% points higher despite a decline in more advanced economies, where private debt remains below the peak. It’s really all about emerging markets and developing countries, where public debt levels are booming, although the IMF is rightly worried about the “high levels of corporate and government debt built up over years of easy global financial conditions, which the Fiscal Monitor documents, constitute a potential fault line.”
Is this the beautiful deleveraging or just a shifting of debt from rich to poor?