$184 Trillion in Global Debt, $86,000 Per Capita: What Can Possibly Go Wrong?

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Published : January 02nd, 2019
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Category : Opinions and Analysis

A new IMF report compiles debt data through the end of 2017. The numbers are staggering.

The IMF blog discusses New Data on Global Debt. The blog has a nice interactive graphic. I created some snips and pieced them together to show four countries simultaneously: US, China, Japan, and Germany.

Debt Synopsis

  • Global debt has reached an all-time high of $184 trillion in nominal terms, the equivalent of 225 percent of GDP in 2017. On average, the world’s debt now exceeds $86,000 in per capita terms, which is more than 2½ times the average income per-capita.
  • The most indebted economies in the world are also the richer ones. You can explore this more in the interactive chart below. The top three borrowers in the world—the United States, China, and Japan—account for more than half of global debt, exceeding their share of global output.
  • The private sector’s debt has tripled since 1950. This makes it the driving force behind global debt. Another change since the global financial crisis has been the rise in private debt in emerging markets, led by China, overtaking advanced economies. At the other end of the spectrum, private debt has remained very low in low-income developing countries.
  • Global public debt, on the other hand, has experienced a reversal of sorts. After a steady decline up to the mid-1970s, public debt has gone up since, with advanced economies at the helm and, of late, followed by emerging and low-income developing countries.

Debt by Size of Economy

  • Advanced economies: There has been a retrenchment in debt build-up among advanced economies. Private debt, although marginally on the rise, is well below its peak. Also, public debt in advanced economies experienced a healthy decline of close to 2½ percent of GDP in 2017. To find a similar reduction in public debt we need to go back a decade, when global growth was some 1¾ percentage points higher than today.
  • Emerging market economies: These countries continued to borrow in 2017, although at a much slower rate. A major shift occurred in China where the pace of private debt accumulation, although still high, decelerated significantly.
  • Low-income developing countries: Public debt continued to grow in 2017 and, in some cases, reached levels close to those seen when countries sought debt relief.

Savings Glut

Here's the key point: Global debt has reached an all-time high of $184 trillion in nominal terms, the equivalent of 225 percent of GDP in 2017. On average, the world’s debt now exceeds $86,000 in per capita terms, which is more than 2½ times the average income per-capita.

Yet, economists Larry Summers and Ben Bernanke believe there is a "savings glut".

 

Source : moneymaven.io
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Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. He writes a global economics blog which has commentary 5-7 times a week. He also writes for the Daily Reckoning, Whiskey & Gunpowder, and has over 80 magazine and book cover credits. Visit http://www.sitkapacific.com
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