UNITED STATES (OBSERVATORY) – The International Monetary Fund (IMF) published a report alarming, pointing to record volumes of world debt.
Exactly one year ago, in its report “Global Financial Stability”, the IMF voiced an important warning about the critical level of debt. Analyzing the growing level of indebtedness of the private sector, the fund found that more than 20% of US corporations are at risk of default after raising interest rates. The IMF experts also calculated that the total assets of companies facing a default are almost $ 4 trillion.
Now the IMF does not warn, but literally beats the alarm, reminding everyone that the global debt has reached $ 164 trillion, or 225% of world GDP.
The report notes that for the growth of debt are mainly responsible for developed economies, however, the developing ones are responsible for the last increase in the indicator. Only in China since 2007, account for 43% of the increase in total global debt.
It is important to note that now the total global debt is even higher than it was at the peak of 2008. Then the public debt and the private sector’s debt accounted for 213% of world GDP.
The main problem, in fact, is created by three countries: the US, China and Japan. They account for about half of the public and private debt, which is $ 164 trillion. Again, note the PRC. The debt of the country increased from $ 1.7 trillion in 2001 to $ 25.5 trillion in 2016. However, as we know, the Chinese authorities are now taking active measures to deflate the credit “bubble”.
By the way, it is worth noting that the IMF calculations clearly have a different methodology from the Institute of International Finance (IIF). Just last week IIF issued a report, which said that the world debt reached $ 237 trillion, or 318% of GDP.
However, whatever the methodologies of calculation, it is clear that the amount of debts has never been so great, and now it poses a real threat to the world economy, whose restoration, by the way, became possible only thanks to the growth of debt.
The most interesting point is that while the central banks of the world kept rates at a record low level, and companies and countries occupied as much as they wanted, no one worried about anything. However, now, when the Fed began raising rates, everyone began to sound the alarm and say that the global debt is unstable.
The United States was criticized separately, since it is the only country that does not even plan to reduce the debt burden. Moreover, Trump’s tax reform forces the US to take even more.
The graph shows how the US stands out against all the others.
In the IMF report, it was separately mentioned about the increase of rates and the growth of interest payments against this background.
Needless to say once again that investors are already avoiding investing in Treasury.
The yields of US ten-year bonds continue to grow and approach the 3% mark.
Given how much the US currently occupies, it is not difficult to understand that it will be necessary to pay much more for these debts. All this carries enormous risks for the entire financial system.