It has been about a decade since the global economic collapse. At the time, governments and central banks sprang into action, spending obscene amounts of tax dollars and printing vast sums of currency. We hadn’t seen anything like it since the Great Depression.
Has the international economy been reborn? Not really. The stock markets may be booming and certain assets are highly valued, but main street is stumbling.
And now all what the government has to show for it is debt.
According to the International Monetary Fund (IMF)’s April Fiscal Monitor, total debt levels reached an all-time high of $164 trillion in 2016, which represents 225 percent of the world economy’s gross domestic product. The total debt is 12 percent higher than the 2009 historic high.
Vitor Gaspar, director of the fiscal affairs department at the IMF, is now urging governments to take action to decrease their obligations. “Because times are good,” governments can employ a series of measures to slash debt volumes and balance the books.
Though debt is ubiquitous all over the world, it is the advanced economies that are in much poorer fiscal shape than developing countries. The one country that is projected to have it worse in the future is the United States.
“The United States is the only country where the public debt-to-GDP ratio is forecast to go up, from 108 percent of GDP in 2017 to 117 percent in 2023,” Gaspar added.
That said, just because the good times are rolling, it doesn’t mean there aren’t any short-term risks, warns Tobias Adrian, director of the IMF’s monetary and capital markets department.
“What we have seen so far is that the discussions about trade and the actions that have been taken have increased investor uncertainty, and as a result, valuations have adjusted. Financial conditions are a little bit tighter than they were six months ago, but they remain, overall, fairly easy,” he noted.
It’s like one of those t-shirts: $164 trillion and all I got for it was this lousy shirt.
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