Global debt soars to 356% of GDP

[Hydrogen]

The world's debt-to-GDP ratio rose to 356% in 2020, a new report from the Institute of International Finance finds, up 35 percentage points from where it stood in 2019, as countries saw their economies shrink and issued an ocean of debt to stay afloat.

Why it matters: The increase brings numerous countries, including the U.S., to extreme debt levels, well beyond what economists have called untenable in the past.

• Nonfinancial private sector debt alone now makes up 165% of the entire world's economic output.

What they're saying: "The upswing was well beyond the rise seen during the 2008 global financial crisis," IIF economists said in the report.

• "Back in 2008 and 2009, the increase in global debt ratio was limited to 10 percentage points and 15 percentage points, respectively."

By the numbers: Global debt increased to $281 trillion last year, with total private and public sector debt rising by $24 trillion in the 61 countries IIF follows.

• That rise accounts for more than a quarter of the $88 trillion increase in debt that has been accumulated over the past decade.
• Government debt accounts for 105% of global GDP, up from 88% in 2019, rising by $12 trillion in 2020 or nearly triple its $4.3 trillion increase in 2019.
• Debt in the financial sector rose by more than 5 percentage points to 86% of GDP in 2020. This was the largest increase since 2007 and the first annual increase since 2016.

Why the debt matters: While worries about significantly pushing up inflation and borrowing costs have not come to pass, slow growth and diminishing returns have, and the world's already high debt levels look to be inhibiting economic growth and threaten to hold back a full recovery from the pandemic in the long run.

• Further, almost all of the debt issued in 2020 was to deal with present circumstances rather than to invest in forward-looking projects or growth, making future investments in such projects more difficult and potentially more costly.

Where it stands: The CBO projected U.S. GDP growth over the next 10 years will be largely below 2% (with the notable exclusion of 2021), and that annual budget deficits will increase.

• The federal debt is set to exceed the size of the economy this year for only the second time since the end of World War II and grow to 107% of GDP by 2031.
• That projection was made without including President Biden's proposed $1.9 trillion stimulus package.

https://www.axios.com/global-debt-gdp-898959ed-f96a-4c4d-85a3-5d3cc419631f.html

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Two most relevent points.

Where it stands: The CBO projected U.S. GDP growth over the next 10 years will be largely below 2% (with the notable exclusion of 2021), and that annual budget deficits will increase.

And.

• The federal debt is set to exceed the size of the economy this year for only the second time since the end of World War II and grow to 107% of GDP by 2031.
• That projection was made without including President Biden's proposed $1.9 trillion stimulus package.

Trump economic growth may have averaged around 3% annually. I have read past studies which concluded CBO cost projections of programs like the F-35 joint strike fighter being inaccurate by an average of more than $1 trillion dollars. The CBO once projected the affordable care act (obamacare) as providing $400 billion in savings to americans.

There is plenty of space for questionable claims in regard to economic projections and their history.

[Gyfts]

COVID has been the best thing to ever happen to Bitcoin, nearly every developed country relied on "borrowing" in order to mitigate the short term economic effects of COVID to provide relief, but at some point, you have to end up paying back the money you printed. You will see countries default and their currencies crash.

[aoluain]

COVID has been the best thing to ever happen to Bitcoin, nearly every developed country relied on "borrowing" in order to mitigate the short term economic effects of COVID to provide relief, but at some point, you have to end up paying back the money you printed. You will see countries default and their currencies crash.

oh there are serious times ahead, Global debt cannot keep climbing.
When the currencies crash, the stock markets have to be affected
big time, Will this affect Bitcoin negatively or positively I wonder?

[jackg]

COVID has been the best thing to ever happen to Bitcoin, nearly every developed country relied on "borrowing" in order to mitigate the short term economic effects of COVID to provide relief, but at some point, you have to end up paying back the money you printed. You will see countries default and their currencies crash.

oh there are serious times ahead, Global debt cannot keep climbing.
When the currencies crash, the stock markets have to be affected
big time, Will this affect Bitcoin negatively or positively I wonder?

If stocks die, everything dies. Forget bitcoin or anything else, we'll be back to agriculture. If your country is alright with socialism during a disaster then you're fine- if not it might be problematic.

Realistically countries could just all print themselves out of their debt (like has been proposed many times with the euro). 

Forget bitcoin being stable or worth anything if your Internet firm can't get power (or you).


Countries print money to solve stagflation,.without the printing that has gone on -everything crashes and no one remains stable. Most economies in the west will have 12% of their gdp shaved off -the UK and a few other European countries stand to lose 40-50% of their gdp directly from investment banks.

[CarnagexD]

COVID is a defining factor of why such percentages came to be. Every country taking a loan in hopes of combating the virus in one way or another, plus sustainability as well. There's not going to be much choice from the countries' part but to request for a loan at the end of the day.

[wxa7115]

COVID has been the best thing to ever happen to Bitcoin, nearly every developed country relied on "borrowing" in order to mitigate the short term economic effects of COVID to provide relief, but at some point, you have to end up paying back the money you printed. You will see countries default and their currencies crash.

If it wasn't the coronavirus that affected economy then it would have been something else, the economies of the world are run with theories that have not been tested and that for the most part are just wishful thinking, one example of this is modern monetary theory which basically tells the governments that they can spend and print as much money as they want with no consequence, obviously governments are going to love to hear that because that is exactly what they want to do but that is not how things work and that is why we are in such a mess.

Governments run their economies as if there is always going to be growth, but when we have a black swan like the coronavirus this forces them to indebt themselves while at the same time the economy shrank making impossible for them to ever repay their debts and forcing them to keep printing money, increase inflation, decrease the purchasing value of their currencies and forcing people to accept to lose their wealth they have worked so hard for years and decades, fortunately for us we have in bitcoin a way to protect ourselves to avoid that outcome but very few people have done something similar and they are going to suffer the consequences of this.

[duchamps]

Any opinions on applications of MMT?

[Vishnu.Reang]

COVID has been the best thing to ever happen to Bitcoin, nearly every developed country relied on "borrowing" in order to mitigate the short term economic effects of COVID to provide relief, but at some point, you have to end up paying back the money you printed. You will see countries default and their currencies crash.

COVID 19 pandemic is just an excuse used by the governments to take out more and more loans and distribute freebies to the population. Governments around the world are taking an increasingly populist stance, and increasing federal spending. The strategy is very simple. Loot the top 20% of the population, to keep the other 80% happy. In a democracy, it is the population that always matter.

Here in India, taxes (both direct and indirect ones) are at all time high, and on top of that the governmental borrowing is also at record high levels. The situation here is much worse, since only around 3% of the population pay income tax. So unlike the case in other countries (where 20% subsidizes the other 80%), there the burden on tax payers is much more. 3% have to subsidize the remaining 97% of the population. Salaried class are at breaking point now, with their lives made miserable by ever increasing taxes.

[Febo]

Global debt soars to 356% of GDP

I thought they talk about countries global debts, but  guess they include all debts in here. I think countries debt is way more important then private debt. 

Government debt accounts for 105% of global GDP, up from 88% in 2019, rising by $12 trillion in 2020 or nearly triple its $4.3 trillion increase in 2019.

That is quite a rise in one year. What we learned from past decade is that it will not go down, but only increase slowly in years with economic growth.

[Rruchi man]

The major cause for the global debt rising in recent time is the pandemic. Most countries of the world really underestimated the corona virus at the start, after they were hit hard because of unpreparedness, the cost of keeping the virus at bay plus with the shutdown of major parts of the economy drove most countries into financial constraints and to offset such constraints, they were forced into borrowing.

[masterzino]

I guess that the global debt will soar even over 500% in the next 24-36 months as the governments will not stop printing money under the pretext of helping people recover from the coronavirus.

We will see an extensive fiat devaluation and tax raises.

[oHnK]

Seeing a global debt graph like this reminds us that the economic crisis is getting closer.  The worldwide economic crisis is even more evident.  Shall we go back to farming like we used to?  because the entire industry collapsed under the threat of a crisis.  When all the production cannot be bought by the people because they do not have enough money. However, the government still thinks that everything is just fine and as if nothing happened at all.

[just_Alice]

Any opinions on applications of MMT?

MMT is a good strategy to enhance the economic system, but it is very risky to implement it in a situation like this. We might be looking at the 6th global crisis right now. The major stabilizing factor in the MMT system is taxation, and while the pandemic is going on - a lot of restrictions apply, people keep losing their businesses, taking loans from the banks to keep living. The worst thing that can happen is the governments increasing taxes, while people don't have enough funds to maintain their lives. This would only mean less income, more debts, more loans, mortgages..you see where this is going. This can turn very nasty.

[verita1]

I am concerned when countries get into debt because the economic crisis begins to tighten strongly. But thank God, in any part of the world there are working hands that love their countries and blessed with a prodigious land that in the end can reap abundant fruits to get out of debt.
I always think that there are difficult moments and other very good ones. Hopefully in this new time we can see everything we have sown and that the most vulnerable people reach benefits.

[aesma]

To be honest these numbers aren't too bad. When you take a loan to buy a home, the loan is often 5 years of your total income, sometimes more. So that comes out at 500% debt, yet it doesn't scare us.

[bassbity]

each country accumulates debt to stabilize the conditions of a country during a pandemic. Well, this refers to the data base, which when the increase in debt value continues to soar, it will have an impact on the country in the next 10 years or even more. So we can analogize a baby who is born carrying a debt that is borne by the state. Suppose a country owes 100 billion: number of citizens paying taxes x annual ratio = ................................

Isn't this impact very heavy. while the IMF still prints banknotes and circulates them around the world saying "let's borrow, come on, we'll lend you whatever money you need" .. LOL

[BrewMaster]

If stocks die, everything dies. Forget bitcoin or anything else, we'll be back to agriculture. If your country is alright with socialism during a disaster then you're fine- if not it might be problematic.

not everything depends on the stock market and even in disaster scenarios not all stocks dump. in fact in the previous recession when stock market was crashing there were some shares that were performing very well.
we don't know how bitcoin comes into all of this though and i think people who make certain claims are missing this fact. there is actually a very good chance that bitcoin would be among those that aren't affected by such doomsday scenarios.

[mindrust]

There are signs of a financial bubble everywhere.

Half of the world economy has stopped yet stocks are at their ATH's.

I checked a few shit stocks that exploded during the dotcom bubble and went to almost "0" afterwards and never recovered for 20 years. You know what I've found?

They are at their ATH's again.

[fiulpro]

Yeah and then also the government encourages people to get more loans at 0%. These things are only going on with the financially stable countries like USA. Stimulus is not enough ! Till the job creation is not going to happen these things would cause the general public to loose a lot of money in the long run. Even if there is 0% interest then also without jobs how do you expect someone to pay ! These loans would be passed on to their other family members and the COVID insurance plus the healthcare is also forcing the people to take such loans but what one doesn't know is :
0% loans are just given to limited people, most of them are asked to wait or to take more like 8-10% ones.
The stock market have also collapsed which does mean that people did loose a lot !! Bitcoins is the only asset which is outperforming during the COVID Pandemic. Let's see how the government handles this now. They should at least get rid of the student loans.

You can find no-interest loans available for a variety of purposes, including 0% APR auto loans, medical financing and large purchases. But remember, while some lenders don't check credit, most do require good credit in order to qualify for the best rates.

^ but it's not available for everyone that's the whole point makes me wonder how they would pay back in the future.

[aesma]

I don't have any debt right now. I feel I'm missing out, if there is some inflation in the end, it's better to have some debt at a low fixed rate, then inflation will basically pay back your debt. If you're fiat rich on the other hand, inflation will eat your savings.