Crisis fears increase as global debt reaches a record $ 250 trillion
The world’s total liabilities continue to grow rapidly as a new report reveals that global debt now exceeds $ 250 trillion. For many investors and market watchers, this raises the spectrum of another possible major economic crisis caused by a collapse of the global financial system. Despite this, the Central Banks that are causing the situation with historically low interest rates remain complacent, and the Fed chief said the situation is “quite sustainable.”
The world’s total debt sets a new record
The Institute of International Finance, an association of financial institutions created after the debt crisis of the early 1980s to help the industry with risk management, has recently published a new worrying report. It shows that the world’s total debt increased by $ 7.5 billion in the first half of 2019, reaching a new record of $ 250.9 billion at the end of the period.
The report explains that China and the United States accounted for more than 60% of the increase. In addition, emerging market debt also reached a new record of $ 71.4 billion, equivalent to 220% of GDP. And with this accelerated pace that does not cool, the global debt is expected to exceed 255 trillion dollars by the end of this year. “Without signs of a slowdown, we expect the global debt burden to exceed $ 255 trillion in 2019, largely driven by the United States and China,” the researchers warned.
Many investors and market observers believe that increasing debt is a serious risk for the world economy. Even the International Monetary Fund (IMF) published a report on the systemic risks facing the world economy in October, highlighting the high level of global debt that caused historically low interest rates and money printing (QE). The IMF explained that “low interest rates have reduced debt service costs and may have contributed to an increase in sovereign debt. This has made some governments more susceptible to a sudden and sharp tightening of financial conditions. “
In addition, interest rates that lower them and rising debts leave governments and Central Banks without tools to react to another crisis. “With a growing scope for greater monetary relaxation in many parts of the world, countries with high levels of public debt (Italy, Lebanon), as well as those where public debt is growing rapidly (Argentina, Brazil, South Africa and Greece ), it may be more difficult to resort to fiscal stimulus, ”warned the report of the Institute of International Finance.
Head of the Federal Reserve of the United States sees nothing to worry about
Given the growing fears in the market and the repeated warnings of professional bodies such as the International Monetary Fund and the Institute of International Finance, the Central Banks seem complacent. The president of the US Federal Reserve The US, Jerome Powell, told lawmakers on Thursday that he sees no financial bubbles or serious risks to the system even though the debt is growing faster than the US economy. “If you look at today’s economy, there is nothing really booming now that you want to explode,” Powell told the House Budget Committee. “In other words, it is a fairly sustainable image.”
This is in stark contrast to what Powell said in January when he admitted to being very concerned about high levels of US debt. “It is a long-term problem that we must definitely face and, ultimately, we will have no choice but to face it,” he explained at the time. One way to understand this contradiction in the Fed chief’s thinking is that he simply hopes that the next crisis will not happen during his presidency, to throw the can down the road with enough time.
The report of the Institute of International Finance reveals that world government debt will exceed $ 70 billion in 2019, compared to $ 65.7 billion in 2018, mainly driven by the increase in US federal debt. UU. “The large increase in global debt in the last decade – more than $ 70 billion – has been driven primarily by governments and the non-financial corporate sector (each for about $ 27 billion),” the researchers noted. “For mature markets, the increase is mainly due to general government debt (up to $ 17 billion to more than $ 52 billion). However, for emerging markets, most of the increase has been in non-financial corporate debt (up to $ 20 billion to more than $ 30 billion). “
If the Central Banks now fear that another economic crisis is on the way, but they are not willing to admit it publicly to avoid fanning the fire that could consume them, this explains why the establishment is so worried that people have another system beyond their control. to escape to such as cryptocurrency. This is the reason why they try to label it as a tool for criminals. For those around the world who seek to protect their savings from another global financial crisis, or from their local governments not paying their mountain of debts by making their fiat money useless, private digital assets now seem to be the last solution.
The cryptocurrency ecosystem has the possibility of applying blockchain-bitcoin technology in order to protect the assets of investors, in times of crisis uncertainty increases, there are great possibilities that cryptocurrencies can help new generations in innovation and creativity . It is expected by new announcements.
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