Warning: $57 Trillion In Global Debt Has Been Added Since 2008
In 2008, the most prestigious financial agency in the world – the Bank for International Settlements (BIS), often described as the “central bank for central banks” – said that failing to force companies to write off bad debts “will only make things worse”.
In even more dramatic fashion, the BIS slammed “the use of gimmicks and palliatives”, and said that anything other than (1) letting asset prices fall to their true market value, (2) increasing savings rates, and (3) forcing companies to write off bad debts “will only make things worse”.
Contrary to widely held beliefs, the world has not yet begun to de-lever and the global debt to GDP ratio is still growing, BREAKING NEW HIGHS!
The BIS is out with a WARNING
Not holding back, just like in 2008, “The world will be unable to fight the next global financial crash as central banks have used up their ammunition trying to tackle the last crises”, the Bank of International Settlements has warned.
These low interest rates have in turn fuelled economic booms, encouraging excessive risk taking. Booms have then turned to busts, which policymakers have responded to with even lower rates.
Claudio Borio, head of the organization’s monetary and economic department, said: “Persistent exceptionally low rates reflect the central banks’ and market participants’ response to the unusually weak post-crisis recovery as they fumble in the dark in search of new certainties.”
They are doing everything they can to (2) prop up asset prices by trying to blow a new bubble by giving banks trillions, (2) re-write accounting and reporting rules to let the big banks and other giants keep bad debts on their books (or other “second sets of books”) and to hide the fact that they are bad debts, and (3) encourage consumers to spend spend spend!
Global debt has grown by $57 trillion to reach $199 trillion in the seven years following the financial crisis – a 40.1% rise, according to a new report. All major economies are now recording higher levels of borrowing relative to gross domestic product (GDP) than they did in 2007.
Chart provided by: McKinsey Global Institute