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The Debt Shackles Return

Michael Heise, (2018), “The Debt Shackles Return”, Project Syndicate, 15 May

Market analysts view the uptick in private lending in most emerging and some developed economies as a sign of higher demand and a precursor of faster growth. But, while this is true in the short run, the relentless rise of overall debt remains among the most serious problems burdening the global economy.

Despite years of deleveraging after the 2008 global financial crisis, debt remains very high – and yet we have now returned to an expansionary credit cycle. According to the Bank for International Settlements, total non-financial private and public debt amounts to almost 245% of global GDP, having risen from 210% before the financial crisis and around 190% at the end of 2001.

General government borrowing in the United States may reach 5% of GDP this year, pushing total public debt to about 108% of GDP. In the eurozone, public debt stands at about 85% of GDP; in Japan, the debt-to-GDP ratio registers close to an eye-popping 240%. Globally, private non-financial debt is growing faster than nominal GDP.

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