A supernova looms: world debt reaches critical mass (original) (raw)
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Global debt dynamics: what has gone wrong
2018
This paper analyses the nature and characteristics of global debt dynamics in the post global financial crisis (GFC) period. First, we attempt to map the ways in which debt has been moving from sector to sector, and from one group of countries to another within the global economy. By capturing this inter-sectorial, inter-national, inter-regional movements of global debt we aspire to contribute to a more comprehensive understanding of global debt and its mode of operation. Second, we attempt to analyse what is wrong with global debt dynamics, i.e. we examine the broken link between what global debt was supposed to do and what it does. Here, we point to three interrelated dynamics: the accumulation of unproductive debt, growing inequalities of income and wealth, and the increase in privately-created, interest-bearing money.
Next Global Crisis: Greatest Recession in the History of Capitalism is at the Doorstep
The main purpose of this paper is to warn academia and general public about the inevitability of the impending global economic recession. Heuristically paper introduces concept of macroeconomic gambling trap within the wider context of global economic history. Macroeconomic gambling trap is then applied to the current situation. The underlying cause for the impending crisis is the growth of debt in the West. Primary progenitor of debt problem is the world’s largest debtor nation, United States. Since the 1970s and the unilateral destruction of the golden standard US political and military power guarantee status of the dollar as world reserve currency despite absence of its backing in gold. Debt explosion caused alienation of financial sector from the real economy in most western countries. The impending crisis is foreshadowed by a Great Recession (Financial crisis of 2007/2008). The Great Recession was only temporally stopped by means of unorthodox monetary policy – with quantitative easing programs and by keeping interest rates at record low, even negative, levels. However, this will make forthcoming collapse only more severe. After analysis of the influence of gold standard collapse on the outcome of the Cold War the paper utilizes specific economic indicators, such as velocity of money M2 for USD, growth in total debt, CAPE ratio for aggregate US stock market, US labour force participation and index of the Shanghai Stock Exchange to indicate the immediacy and the inevitability of the next global recession.
Global debt dynamics: The elephant in the room
The World Economy
This introduction analyses the nature and characteristics of global debt dynamics in the post global financial crisis (GFC) period. First, we attempt to map the ways in which debt has been moving from sector to sector, and from one group of countries to another within the global economy. By capturing this inter-sectorial, inter-national, inter-regional movements of global debt we aspire to contribute to a more comprehensive understanding of global debt and its mode of operation. Second, we attempt to analyse what is wrong with global debt dynamics, i.e. we examine the broken link between what global debt was supposed to do and what it does. Here, we point to three interrelated dynamics: the accumulation of unproductive debt, growing inequalities of income and wealth, and the increase in privately-created, interest-bearing money. We conclude by discussing how each paper in this special issue contributes to the current state of the art on the analysis of global debt dynamics in emerging and developing economies.
Debt Crises: For Whom the Bell Tolls
2016
Macroeconomics Conference for useful comments. The usual waiver of liability applies. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.
Debt Surges-Drivers, Consequences, and Policy Implications
IMF working paper, 2024
: Many countries find themselves with elevated debt levels, increased debt vulnerabilities, and tight financing conditions, while also facing increased spending needs for development and transition to a greener economy. This paper aims to place the current debt landscape in a historical context and investigate the drivers of debt surges, to what degree they result in a crisis as well as examine post-surge debt trajectories and under what conditions debt follows a non-declining path. We find that fiscal policy and stock-flow adjustments play important roles in debt dynamics with the valuation effects arising from currency depreciation explaining more than half of stock flow adjustments in LICs. Debt surges are estimated to result in a financial crisis with a probability of 11–20 percent and spending-driven fiscal expansions during debt surges tend to result in a high probability of non-declining debt path.
A Te m p l a t e F o r U n d e r s t a n d i n g PART 1: THE ARCHETYPAL BIG DEBT CYCLE
The Global Economic Crisis: How to Stop Sustaining Unsustainability
Journal of Politics, vol. 75, no. 3 (July 2013), 2013
As of September 2012, the total U.S. public debt was 16trillion,or10316 trillion, or 103% of gross domestic product. Interest payments alone amounted to 16trillion,or103340 billion at an interest rate of 2.13%. This article will examine five recently published books in order to answer several questions. How serious is the global economic crisis? Why does debt matter? What caused the 2008 recession? What have been the effects of economic globalization? Is the United States in absolute decline? How should the country deal with a rising China?
When is debt a menace? The economic and political aspects of debt sustainability
Twelfth EUSA Biennial Conference. Boston, 2011
Just when it seemed like sovereign default was a virtual impossibility in the developed world, the turmoil in sovereign debt markets triggered by explosive debt growth in the wake of the financial crisis raised new fears about fiscal prospects in many advanced economies. However, assessing the severity of the situation is complicated by the fact that no definitive empirical or theoretical benchmark exists for sovereign solvency. This paper reviews the literature on solvency, sustainability and default as well as recent expert contributions about the severity of the present fiscal situation in the developed world and finds that the difficulties involved in determining the dangers entailed in outstanding debt include not only the need to deal with economic uncertainty surrounding the ability of the given sovereign to pay, but also-and the paper argues in the case of developed countries more importantly-gauging the political context determining the willingness of the sovereign to service debt. It then goes on to explore the ways in which markets gauge this degree of willingness, using rating agencies' sovereign rating methodologies as a proxy for markets' approach to creditworthiness and quoting examples of ratings changes in the recent past to see to what degree the considerations listed in the rating methodologies are applied in practice. It concludes that increased nervousness about sovereign default might lead to a more intrusive influence by market actors on a broader range of policy and institutional issues in developed countries than before.