Global Debt Continues to Climb

The amount of global debt has hit the $100 trillion mark as central banks around the world continue to borrow to keep their economies on track to recovery. This totals a 40%, or $30 trillion, increase since the first signs of economic downturn that occurred in mid-2007. Although total debt accounts for household, corporate, and government debt, central banks have been by a wide margin the biggest borrowers. Still corporate debt has risen sharply over the same period now totaling above $21 trillion. With the accumulation of high debt levels the U.S., U.K., France, and Japan were downgraded one level below their previous top-notch credit ratings. Despite their lower ratings the U.S. and U.K. still saw their interest rates fall amidst their central banks aggressive policy of debt issues to spur recovery. In the private financial markets bond demand has not shown any signs of slowing down from the increased debt levels and investors have saw global returns of 31% and returns above 40% since 2007.

Here in the U.S. signs of economic growth and central bank tapering of it’s stimulus purchases have somewhat alleviated the immediacy of debt concerns for the time being. A shrinking unemployment rate offers positive signs that the initial strategy of deficit borrowing was the right choice. This year government looks to decrease its borrowings to the lowest levels since 2008, selling $717 billion in net bonds, 14% less than in 2013. Although optimism is on the rise there is still cause for serious concern as economists predict massive fiscal burdens in the decade to come. With a continually aging population it is estimated that Social Security payments will rise 67%, or $1.4trillion, and health care spending will double to 1.8 trillion by the year 2023 unless entitlement reform occurs. It is clear that global economies have made some progress since the financial collapse of 2008, but a storm still looms on the horizon.

Source: Bloomberg