The Giant Debt Bubble
“279 trillion Dollar debt ’’
Total worldwide debt has never been higher. And yet, there’s little sign of this current wave retreating any time soon. Now with the coronavirus outbreak being declared a pandemic, governments have announced hundreds of billions of dollars in stimulus packages that will send debt even higher. The Institute of International Finance estimates total worldwide debt, which is made up of borrowings from households, companies,s, and government, surged to a staggering $253 trillion at the end of September 2019, and right now the global debt has surged to 279 trillion dollars this is the biggest surge since the second world war.
But the biggest surge comes from public debt that’s the money that governments borrow their loans are now equal to 99 of the global GDP the numbers are staggering why are governments borrowing so much because they have no choice the pandemic has forced them to do these countries worldwide spent big to keep their economies afloat they had to support their citizens with all kinds of things free food medical care vaccines health infra infrastructure and all of this needed money so governments have no option but to borrow and meet expenses the result is these leading economy are severely indebted.
- The united states have the highest level of government debt almost 20 trillion dollars that’s more than 100 of its GDP.
- Japan situation is alarming the country has borrowed more than 9 trillion that’s more than 230 percent of japan’s GDP.
- China has more than five trillion dollars in national debt more than 50 percent of its GDP
From the past, we have learned that when countries have accumulated so much debt it has always led to a financial crisis. For example, from 1970 to 1989 many Latin American countries accumulated huge amounts of debt at the end of 1970 the region’s outstanding debt was 29 billion dollars in the years that followed Latin American governments could not manage these loans by the 1980s debt levels in this region reached 327 billion dollars from 29 to 327 billion it’s an increase of more than 11 times here is what happened next in 1982 Mexico defaulted on its sovereign debt Argentina and brazil had to weaken their currencies a global financial crisis began a total of 27 countries had to reschedule their debts 16 of these were from Latin America.
The story repeated itself in 2007 banks in the united states gave out a lot of bad Mortgages it was a systemic failure u.s household debt was allowed to reach well over 10 trillion dollars that were more than 40 percent of the GDP many of these loans failed major banks in the united states collapsed in 2008 the result was these two trillion dollars were wiped off from the global market u.s and European banks lost more than one trillion dollars they had placed a bet on Mortgage based securities
So we can say that whenever countries have accumulated massive levels of debt they found themselves in financial crisis if the current debt is not controlled now the world will be forced to deal with another financial nightmare this giant pile of debt could trigger the next financial crisis
