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Increasing global debt levels is a fact - next global crisis ahead

22 countries are already in debt crisis; a further 71 could be soon

Key points:

... China, another large surplus country, lends money from its government, mainly by buying debt from countries with currencies used in international trade such as the US (dollar), Germany (euro), Japan (yen) and UK (pound).”

One explanation of the 2008 financial crisis is based on the interaction between rising inequality and current account deficits. Increasing inequality can reduce economic growth as higher income groups spend less of their income than middle- and low-earners. But international financial deregulation allowed countries to make up for this lack of growth by running higher current account deficits for longer. Borrowing more from foreign lenders allowed economic growth to continue, even though little income was going to poorer groups in society. Meanwhile, the rich put an increasing amount of their growing share of national income into speculation and risky financial assets. Rising inequality, along with financial deregulation, fuelled the unsustainable boom in lending and increased risk in the global economy.”

The average debt or lending level has increased from 31.3% of GDP in 2011 to 35.8% in 2014. This means that the total debts owed by countries, which are not covered by corresponding assets owned by those countries, have risen from $11.3 trillion in 2011 to $13.8 trillion in 2014.”

... the average net debt or surplus level will rise to 39.5% of GDP in 2015; $14.7 trillion. Overall, net debts owed by countries will therefore have increased by 30% – $3.4 trillion – in four years.”

This global debt level is driven by the actions of the world’s largest economies. Of the world’s ten largest economies, eight have sought to recover from the 2008 financial crisis by borrowing or lending more, thereby further entrenching the imbalances in the global economy. The US, UK, France, India and Italy have all increased their net debt to the rest of the world. Germany, Japan and Russia have all increased their lending to other countries.”

... Germany could have turned its large surplus into a small deficit, by allowing workers’ wages to increase, enabling them to buy more from its major trading partners. This would have allowed countries with large debts to German banks, such as Greece, Portugal and Spain, to export more to Germany, more easily reducing their own deficits.

It seems the lessons of the financial crisis and the danger of these global imbalances has not been learnt. Current patterns of global trade and finance are sowing the seeds of the next global crisis.

Full report:


A "prophecy" is about to be confirmed?

Armstrong predicts that a sovereign debt crisis will start to unfold on a global level after October 1, 2015 – a major pi turning point that his computer model forecasted many years ago.” (fa.ev/a-global-sovereign-debt-crisis)

Comments

  1. Anonymous21/7/15 15:59

    Governmental debt is inherently undemocratic. Public debt undermines democracy by allowing government employees and elected officials to fund projects citizens may or may not want.

    Deficit government spending allows oligarchs who easily purchase governments and politicians to avoid taxes, sell products and services to the financially captured government, and be paid with borrowed funds that only the common folk are required to pay back.

    ReplyDelete

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