Global debt reaches new record highs: IMF

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?

Comments

  1. payWave tap and home equity mate
    We also have Gerry Harvey interest free loans just in case

    • Alan CameronMEMBER

      I suspect the “interest” has been included in the price used. So people who pay up front are getting taken to get more people to buy the products.

  2. Stewie GriffinMEMBER

    Hopefully Trump will blow it all up and trigger a genuine debt reset… as opposed to accommodating the Bankers and the Business Lobby like that quisling Obama did.

    • Yes, I was hoping that Mr Trump would speed up the process as well, not that is wasn’t going to happen anyway.

      https://surplusenergyeconomics.wordpress.com/2018/12/30/143-fire-and-ice-part-one/

      We can start writing off debt now and take a 50% cut in what we think of as our savings or keep on going and lose all our savings……….they will throw everything into the bonfire before they give up………Ah well, new dollars will come in after the obligatory 3 or 4 years on gold based trading between countries.

      Not that I think that this is the big one, everyone still has faith in central banks yet.

      • I have a lot of time for Tim Morgan. This quote from the article nails it:
        “Politically, of course, problems for some can be opportunities for others. It wouldn’t be all that hard to craft an agenda which capitalises on these trends, promising, for example, much greater redistribution, ultra-tight limits on immigration, and capping the retirement earnings of the policy elite.

        If you did promise these things, you’d probably be elected. Unfortunately, though, that’s the easy bit. The hard part is going to be grappling with the continuing decline in prosperity at the same time as fending off a financial crash.

        How, having been voted into power, are you going to tell the voters that we’re all getting poorer, and that some public services are ceasing to be affordable within an ever more rigorous setting of priorities? And are they going to believe you when you tell them that the destruction of pensions is entirely the work of your predecessors? Finally, what are you going to do when one of the big endangered economies fails?”

  3. ErmingtonPlumbingMEMBER

    No meaningful Economic Left/Right dichotomy within our Democracy,…no Economic policy for the benefit of the 90%+

    “Class struggle defines most of human history. Marx got this right. The sooner we realise that we are locked in a deadly Warfare with our ruling, corporate Elite, the sooner we will realise that these elites must be overthrown.”

    Chris Hedges – Lets get this class war started.

    “The inability to grasp the pathology of our oligarchic rulers is one of our greatest faults.
    Because we don’t understand the pathology of the Rich we’ve been saturated with cultural images and a kind of cultural deification of wealth and those who have wealth, they present people of immense wealth has somehow leaders, Oracle even and we don’t grasp internally what it is an oligarchy class is finally about or how venal and morally bankrupt they are, we need to recover the language of class warfare to grasp what is happening to us and we need to shatter this self-delusion that somehow if as Obama says we work hard enough and study hard enough we can be one of them.
    The fact is, the people who created the economic mess that we are in, were the best educated people in the country.”

    https://youtu.be/L6unS2JF8TA

    Power corrupts most individuals and all institutions of any idelogical leaning,…this is why real Democratic accountability is so important and why it is constantly under attack.

    • I always appreciate the insights of Hedges. He applies an historical perspective that helps to see that we aren’t special in any way. It would be nice if he wasn’t so righteous about it as his tone had put off a few people I’ve recommended him to. A good contrast is Mark Blyth. His analysis and commentary is given in a way that is more more digestible for a broader audience.

  4. I often wonder if others struggle as I do with the concept of “global debt”
    As in the world owes who exactly what?
    In the same sense that I can’t really loan money to myself, I can’t ever really be in debt to myself nor at a larger scale can a community ever really be in debt to itself.
    So what is this “global debt”? who exactly owes who money?
    It seems to me it is largely a capital structure that we’ve created to ensure that each of us is born with a financial obligation to the system, however the choice to honor these debts rest entirely with the next generation, logically the next generation should tell their betters (those who would suggest they’re owed money) to go F themselves…It would seem to me that this option is ultimately the only way that these global debts can ever be discharged, so do debts that can’t ever be discharged even really exist?

    • The really important Global Debt is the excess carbon we’ve put into the atmosphere, and which we need to “pay down” before we are made extinct

    • Yes, all money and monetary systems are just abstract human creations, and the buildup of debt is just a quirk of how they work.

      It’s not really surprising though – look at the three sources of money: 1. Overtly created by Governments, 2. Government deficit spending with bonds issued in equal amounts, and 3. Privately created by banks when they lend [1]. The last two account for the vast majority of all money in existence (I recall a statistic that 85% of the money supply in the UK just before the GFC was bank credit). And they just happen to create as much debt as they do money.

      There are some good resources, like David Graeber’s “Debt: The First 5000 Years”, which goes more into how money and debt are inextricably linked. At the end of the day, money has always been as much about representing debt than representing value, if not far more about debt.

      1. https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy

    • This is how I think of it. Global debt is a future obligation for the worldwide economy to grow at an exponential rate to ensure interest and principle on debt can be repaid. Once principle is repaid money is removed from circulation so new debt continually needs to be created. If debt is not repaid in full the money in circulation lose its value. Of course the whole scheme is doomed to failure as exponential growth is not possible in a finite world (at least not for long).