Global debt has reached record heights without any signs of relief. While central bankers try to explain away the phenomenon of these out-of-control numbers, it’s not much of a mystery. Immediate consumption with the promise of repayment sometime in the future has consequences. Global debt is staggering to the point most of it will never be repaid. Certainly not in our generation. Perhaps by our grandchildren, but as global debt keeps mounting, the picture is doubtful.
The per capita global debt is $30,000. Who, exactly, will be making repayments?
Economists insist that the 2007 financial crisis could not have been predicted. Yet, all the signs of out-of-control credit where there. Today, economists are repeating the same mantra, despite the spiraling world debt. The question is not if the next bubble will strike. It’s a matter of when.
The math is fairly simple. The more a country increases its debt to simply stay afloat, the more like the increasing debt will cause a tightening of credit. The next step in the equation is a burst bubble and economic crisis. This is what happened in 1929, happened again in 2007, and it’s happening now. Past behavior is the best predictor of future behavior.
Out-of-control credit will undoubtedly slow down the US’s current economic growth. It probably won’t cause an outright crisis. Other countries may not be as fortunate.
Countries such as China, Belgium, South Korea, Australia, and Canada are experiencing an unprecedented credit bubble, with few systems in place to control it. The resulted inflation or simply write-offs of debts could result in a global financial disaster we have not seen before. The current economic upswing is unlikely to continue.
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