Global Debt Hits Record $233 Trillion, Up $16Tn In 9 Months

Last June we reported  that according to the Institute of International Finance - perhaps best known for its periodic and concerning reports summarizing global leverage statistics - as of the end of 2016, in a period of so-called "coordinated growth", global debt hit a new all time high of $217 trillion, over 327% of global GDP, and up $50 trillion over the past decade.

Six months later, on January 4, 2018, the IIF has released its latest global debt analysis, which reported that global debt rose to a record $233 trillion at the end of Q3 of 2017 between $63Tn in government, $58Tn in financial, $68TN in non-financial and $44Tn in household sectors, an total increase of $16 trillion increase in just 9 months.


According to the IIF, private non-financial sector debt hit all-time highs in Canada, France, Hong Kong, South Korea, Switzerland and Turkey.

And yet, largely as a result of the ongoing Chinese crackdown on shadow banking, even as global debt rose to new record highs, the ratio of debt-to-GDP fell for the fourth consecutive quarter as economic growth accelerated. The ratio is now around 318%, nearly 10% below the high set in the first quarter of 2017.

In the annual report, the IIF notes that "a combination of factors including synchronized above-potential global growth, rising inflation (China, Turkey), and efforts to prevent a destabilizing build-up of debt (China, Canada) have all contributed to the decline."

Still, while global GDP has enjoyed a period of accelerating growth, this may soon come to an end even as debt levels continue to rise. Meanwhile, the debt pile could act as a brake on central banks trying to raise interest rates, given worries about the debt servicing capacity of highly indebted firms and government, the IIF analysts wrote.

And speaking of rates in 2018, the IIF pointed out that after several years of forecasters reducing their year-end rate predictions, 2018 is the first year in many when "for a change" forecasters are predicting a rebound in interest rates.  Maybe this is the one year when "experts" will finally be right when it comes to interest rates.




Batman11 Sun, 01/07/2018 - 17:23 Permalink

What happens when you use neoclassical economics that doesn't consider debt?

They used it in the 1920s.

The 1920s roared with debt based consumption and speculation until it all tipped over into the debt deflation of the Great Depression.

No one realised the problems that were building up in the economy as they used an economics that doesn’t look at private debt, neoclassical economics.

They used neoclassical economics as the gold standard for globalisation.

The world saturated in debt, what was supposed to happen?


Batman11 Sonny Brakes Sun, 01/07/2018 - 17:53 Permalink

A group has grown up to start looking at the problems as the mainstream economists are so resistant to change, the Council on Economic Policies.

William White (BIS, OECD) has seen these problems building since the first Greenspan “put” in 1987.

Adair Turner looks at the problems and can see a way forward in a debt saturated world.

Adair Turner talks of the Chicago Plan which was put forward in the 1930s when they faced the debt deflation of the Great Depression.

The IMF have done a recent investigation into the Chicago Plan and can see its merits. 

In reply to by Sonny Brakes

Let it Go Sun, 01/07/2018 - 18:42 Permalink

It is clear debt has become the main driver of both the American and global economy. This is not just about the auto loans we are seeing here in America, a giant debt bubble is forming that extends into many sectors of our economy. This is also happening in many places across the world.

The Federal Reserve has been pumping in trillions of dollars of liquidity into the economy and much of it has resulted in pulling future consumption forward. These policies will soon become a headwind to both future sales and growth. More on the ramifications of this policy in the article below. 

 http://Debt Is The Main Driver Of Both American And Global Economy.html

ds Sun, 01/07/2018 - 22:04 Permalink

Are we still smoked that the fiat currencies of places with high Govt and Financial Sector Debt are not salmons.