World is drowning in debt and it spells disaster for everyone

Thursday, August 16, 2018
By Paul Martin

Darius Shahtahmasebi
RT.com
16 Aug, 2018

The entire planet is swimming in debt, yet no one seems to criticize the system itself as being fundamentally flawed.

“A man in debt is so far a slave,” American essayist Ralph Waldo Emerson once reportedly said.

In light of this statement, I contend that I don’t need to have a college degree in economics to tell you that our current financial system enslaving the entire world is not sustainable – and headed for one hell of a spectacularly ugly crash.

Last month, the Washington-based Institute of International Finance published their latest statistics indicating that global debt had reached $247.2 trillion by the end of March this year, an increase of 11.1 percent from last year alone. In other words, since the start of this year, global debt rose by a whopping $8 trillion in just three to four months.

In 2016, the global debt was already at $164 trillion, which was equivalent to 225 percent of global GDP. The global debt-to GDP ratio currently exceeds 318 percent, having risen for the first time since the third quarter of 2016. Just the US debt to GDP ratio alone currently exceeds 100 percent. This debt-to-GDP ratio is 12 percentage points higher than in 2009, during the aftermath of the global financial crisis. We are now at levels not seen since during the 1980s and the International Monetary Fund (IMF) expects this to continue on an upward trend.

According to the Institute of International Finance (IIF), the pace of the debt increase in this first quarter is a concern, noting that the quality of the debt has declined as well. Perhaps I do need that college degree after all, because it is beyond me how different debts have different qualities. Debt is debt, and right now the entire globe is drowning in it.

According to the report, government debt has risen the most sharply in Brazil, Saudi Arabia, Nigeria and Argentina. In Argentina and Nigeria, two emerging markets, over three-quarters of redemptions will be in dollars with $900 billion of their debt being held in US bonds which will mature in 2020.

Strangely enough, investors have allegedly been “going wild” for Saudi Arabian debt as the country began seeing massive demand for its first ever international debt issuance. Apparently, debt is big business and is actually quite profitable – for some people, that is.

Saudi debt shouldn’t surprise us though; this is a country that had to kidnap some of its wealthiest citizens and confiscate their assets in order to secure itself up to $800 billion of extra funds. Perhaps it would be simpler just to pull its military out of Yemen and allow the poorest Arab nation a chance to breathe after four years of relentless war crimes, but I digress.

According to the IMF, in 2016, the countries with the largest debts, both public and corporate, were the United States with over $48.1 trillion, China with over $25.5 trillion and Japan with over $18.2 trillion. Advanced economies saw their debt advancing by $64.1 trillion between 2001 and 2016 and the emerging market economies saw an equally disturbing rise from $37.5 trillion over the same period.

Seriously, there is a reason the US spends so much money on war. With such a large and widening fiscal deficit, the US needs to come up with even more money to pay its bills. Debt on its own is one thing, but we also must consider the interest payments that come with this debt. Some estimates suggest that if these trends continue, including and especially in light of the US president’s ludicrous tax cuts as well as his nonsensical trade wars with some of the world’s largest economies, interest payments could climb to $1.05 trillion by 2028. This means that the interest payments would surpass funding for even something as hefty as the juggernaut that is the US military, as part of the US overall budget.

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