Tag Archive for greece debt

Solving the Global Debt Problem

Debt is now a problem across the globe, despite the problems faced by most of the developed world over the last few years – it seems that nobody is actually learning the lesson.   Even the Governments that are being criticised for their debt reduction efforts like the UK are not actually reducing their debt burden merely slowing down it’s growth.

The Argentine president, Cristina Kirchner waved goodbye with a painful three hour ramble claiming that only Argentina had unlocked the secret to reducing national debt.  Although if the rest of the world followed her crackpot model of making up statistics and defaulting on loans we’d be in an even worse state than now.

The worry is that debt is growing into a world wide epidemic, and it looks like default is going to be the only liable option for many sovereign states.   We have seen Greece’s efforts where ruthless austerity measure have brought the country to it’s knees, whilst falling output has meant  that their debt has actually grown.  What are their options? There seems to be a growing realisation that Greece will simply never be able to repay the debt they have already established – where is the sense in lending them more?

More and more countries are heading in Greece’s direction.  The factors vary, but the list is growing – the latest is Austria which looks in real trouble crippled by a catastrophic banking sector which is billions in debt.

Can you believe that global debt has risen by 17% since the crisis began?  It’s like we’ve all looked at the sorry state of our bank statements and gone on a spending spree to cheer ourselves up!  The reality is of course different, debt levels are in many cases not only unsustainable they are so large there is little real chance of them ever being paid off.  The word bankrupt is very relevant to more countries than you could imagine.

We often look to  the East for salvation, yet in Asia the problem is becoming arguably worse than the Western economies. China increasingly focuses on growth whilst ignoring the strict credit controls that it used to operate under.  China’s overall debt levels are now estimated $28 trillion, which is true is approaching 300% of GDP comparable to the USA when you account for relative output levels.  Don’t take our word for it though, there are articles and opinions on much of the worlds economic press if you look for it, worth investing in a US or UK VPN to get access to the best reporting though.

MAny economist are not actually that concerned, and in some senses as long as output, asset values and wealth are growing then this is probably right.  However this isn’t happening across the board where debt is still growing and growth has stalled.   The very definition of debt requires that it is at some point paid back but this is looking increasingly unlikely in more and more cases.  This credit cycle is something that the world has never seen before and nobody knows how it will come to an end.

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