Fed looks at “declining” global debt of 238% of GDP

Within the Federal Reserve, the St. Louis Fed is a kind of data analysis monster. Charts and statistical surveys are available for all kinds of economic data. A few days ago they were thinking about global debt, which means debt of the non-financial sector.

According to the Bank for International Settlements (BIS) in Switzerland, global debt (evaluation of 43 national economies) rose from 115 trillion Dollars to 184 trillion Dollars from March 2009 to March 2019 if the pure debt level is converted into money. Well, that’s the real figure. But the St. Louis Fed notes that the global economic output, which has risen since then, must also be taken into account. Therefore, it makes more sense to put the debt in relation to the economic performance as a percentage of GDP, which is also done in the EU to present declining debt statistics. Although the actual debt in Euros is increasing!

According to the report, global debt peaked in September 2016 at 245% of GDP. Since then, it has fallen somewhat to 238% in March 2019. This leads to the conclusion that there has been a certain stabilisation of the debt level for three years. Before the financial crisis, the debt ratio had been 207%. The stabilisation is coming primarily from the industrialised nations, and not from the emerging markets. According to the St. Louis Fed, the loose monetary policy of the central banks could lead to a further increase in the debt burden, but not as bad as ten years ago.

The increase in debt after the financial crisis can be explained by more indebtedness of governments (USA are strongly on board) and companies! The indebtedness of consumers has not increased. The first graph clearly shows that the increase in global debt over the last ten years has come primarily from China. It has also come from the USA! The second graph shows the development of debt as a percentage of GDP over the last 20 years. Only Germany presents a good development if this chart is correct.

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