• 3 hours Buffett, Dimon Voice Support For Stock Buybacks
  • 9 hours Newmont Goldcorp Now World's Top Miner After Sealing The Deal
  • 1 day Canopy Growth Eyes U.S. Pot Producer In $3.4B Takeover Deal
  • 1 day U.S. Slaps New Sanctions On Cuba To End ‘Glamorization Of Communism’
  • 1 day The Unstoppable Electric Bus Revolution
  • 1 day Pinterest, Zoom Launch Much Anticipated IPOs
  • 2 days Marijuana’s Bizarre Bottleneck Isn’t What You’d Expect
  • 2 days Climbing Stocks Weigh On Gold, But A Turnaround May Be Near
  • 2 days China's Economic Growth Exceeds Analyst Expectations
  • 2 days Gold Prices Fall On Record Global Production Estimates
  • 3 days Can Meditation Make A Business More Profitable?
  • 3 days America’s Biggest And Most Profitable Actually Got Tax Rebates
  • 3 days Central Bank Gold-Buying Is Chipping Away At The Dollar
  • 3 days The Three Assets That Outperformed The S&P Over 20 Years
  • 4 days Inside China’s Renewed War To Purge the Internet
  • 4 days Trump Blames Fed For 10,000-Point Stock Market Loss
  • 4 days Musk Draws SEC Attention With Another Controversial Tweet
  • 4 days The Overlooked Factor Contributing To Inflation
  • 5 days Does Capitalism Need An Upgrade?
  • 5 days Next Major Stock Market Selloff Could Spark A Bull Run For Gold
Does Capitalism Need An Upgrade?

Does Capitalism Need An Upgrade?

If the American middle class…

China's Economic Growth Exceeds Analyst Expectations

China's Economic Growth Exceeds Analyst Expectations

China, the world’s second-largest economy…

Damir Kaletovic

Damir Kaletovic

Writer, Safehaven.com

Damir Kaletovic is an award-winning investigative journalist, documentary filmmaker and expert on Southeastern Europe whose work appears on behalf of Divergente Research.

Contact Author

  1. Home
  2. Markets
  3. Economy

The World Is Drowning In $247 Trillion Debt

Bubble

Global debt has reached an alarming $247 trillion in the first quarter of 2018, according to a report from the Institute of International Finance (IIF), which puts debt at $29 trillion higher than it was just in the fourth quarter of 2016.  

Sector-by-sector, from household and government debt, to financial and non-financial corporate debt, the world is drowning.

Government debt the world over is up to $66.5 trillion—a $10-trillion jump from 2013—while the non-financial corporate sector accounted for $73.5 trillion in debt in the first quarter of this year, up from $57.7 trillion in 2013.

(Click to enlarge)

Canada, France and Switzerland have seen huge upticks in non-financial corporate debt, while both Switzerland and Denmark have seen marked increases in household debt since the first quarter of last year.

Government debt to-GDP ratios have surged in the U.S., Australia and Greece, but actually declined significantly in Germany. But the sharpest increases in government debt went to Brazil, Saudi Arabia, Nigeria and Argentina.

Total emerging market debt, not including financials, rose by $2.5 trillion to a new record of $58.5 trillion in the first quarter of this year. Notably, Colombia, Argentina and the Philippines recorded a sharp increase in corporate debt-to-GDP ratios. However, Turkey and China saw some decline in this ratio, even as household debt to-GDP levels rose significantly in both: in China to almost 50 percent; Chile, over 45 percent, and Colombia (30 percent). Related: These 3 Industries Are Immune To The Trade War

As corporate and household debt soar in mature markets, the debt-to-GDP ratio has topped 318 percent. It’s significant because this is its first quarterly increase in two years.  And it’s this ratio that has everyone concerned.

Overall, global debt has risen by over $8 trillion in the second quarter of this year, outpacing anything since the first quarter of 2016. From the IIF’s perspective, this means that the quality of debt has declined, particularly in emerging markets.

“The global debt-to-GDP ratio (318%) rose for the first time in over a year. With global growth losing some momentum and becoming more divergent, and U.S. rates rising steadily, worries about credit risk are returning to the fore—including in many mature economies,” the IIF said in its report.

"After a decade of low interest rates, the corporate and public debt in many places has ballooned to a staggering $164 trillion," CEO of the World Bank, Kristalina Georgieva, told Bloomberg. “With interest rates going up, attention on debt sustainability has to be stronger.”

Chief Americas economist at Nataxis, Joseph LaVorgna, thinks that corporate sector debt is very concerning because it’s highly leveraged and vulnerable to higher interest rates.

Related: Is This The Answer To The Looming U.S. Healthcare Crisis?

“Firms have used artificially low rates to borrow in the capital markets and only buy back stock in the equity market,” LaVorgna told CNBC. “The inherent instability of debt over equity financing suggests that the next downturn could hit investment spending unusually hard.”

Even U.S. National Security Director Dan Coats is worried, according to CNBC. He called America’s $21 trillion debt “a dire threat to our economic and national security.”

And that’s not even considering the massive impact on assets a looming $200-billion trade war move could have.

By Damir Kaletovic for Safehaven.com

More Top Reads From Safehaven.com:

Back to homepage

Leave a comment

Leave a comment