Can the world economy overcome its $200 Trillion debt burden without mass money-printing?
*Los Angeles Times, by Tom Petruno, July 10, 2016
”Total government debt outstanding worldwide was worrisome in 2008. It has since doubled to $59 trillion, according to Economist Intelligence.
But that is just one slice of the global debt pie. Add in household, corporate and bank debt and the grand total was a mind-boggling $199 trillion in mid-2014, up 40% since 2007, according to a study last year by McKinsey Global Institute.”
”In the U.S., the debt-to-gross-domestic-product percentage edged up to 233% in 2014 from 217% in 2007. In Spain the figure jumped to 313% from 241% and in Japan it rose to 400% from 336%. There is no single ‘right’ number, but obviously higher is riskier.”
”Many economists believe the world can continue to muddle through with high debt and slow growth for a while. It helps that central banks have bought up trillions in bonds since 2007 as a way to ease governments’ burdens. The crucial test will come if the global economy slides toward a new recession sooner than later.
With debt levels so high, and interest rates already near zero or below, the pressure would mount on central banks to use what Wall Street regards as the nuclear option: Start printing mountains of money for governments to hand directly to consumers — to spend, pay off debt or save with no strings attached.
The political and economic risks of such a move would be enormous — which is why it would only be considered as a desperation move.”
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