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Global debt has sky rocketed

by Karen Faulkner, Worthy News Correspondent

(Worthy News) –
In a reflection of the COVID-19 crisis and ensuing governmental measures, Global debt/GDP skyrocketed to an all-time high in the first quarter of 2020, Zero Hedge reports. Overall debt for the non-financial sector has jumped from 241% of global GDP at the end of 2019 to 252% of global GDP now. This is the biggest jump ever recorded by the Bank for International Settlements (BIS).

Data from the BIS confirms that central bank inflation targets are far higher than the official 2%, Zero Hedge reporter Tyler Durden notes. Inflation must be in the 10%+ range for central banks to erase the debt. “Anything below that would require debt defaults instead of inflation to wipe away the debt… and that is unacceptable,” Durden writes.

The leverage ratios for both countries with advanced economies (DM) and those with emerging markets (EM) have jumped. A relatively deeper COVID recession is anticipated for certain EM economies: “the OECD Sep ‘2020 Economic Outlook sees India and South Africa GDP falling by 10.2% and 11.5%, respectively – will likely magnify the jump in some EM’s leverage ratios,” Durden says. The total leverage ratio for the Eurozone, China and the US are reportedly largely aligned.

“The global sovereign debt-to-GDP ratio has reached 89%, up 10 percentage points, the largest quarterly rise on record. Debt service ratios ticked up, but only marginally, reflective of the tremendous QE support unleashed by central banks this year,” Durden reports.

According to Durden, household debt has risen at a more modest pace as “consumers have moved into wait-and-see mode.”