Global debt is currently almost $250 trillion. That is three times the combined income of every country in the world. Sounds outrageous, doesn’t it? Actually, falling into debt is more common than you might think.
In order to progress economically, countries around the world are expanding resources that their governments are unable to cover on their own.
They do so by borrowing money from external sources–such as other countries, or banks–in order to cover the costs. Acquiring debt this way is so prevalent around the globe that almost every country in the world currently owes a sum to another entity.
But while it is common practice to fall into debt, the decision to do so is not one to be taken lightly.
Ramping up debt creates an increasingly unstable economic environment. As a country owes more and more, shifting interest rates can devastate both their public and private sectors. Seeing that the private sector is also the primary driver of skyrocketing debt, the situation can quickly turn into a vicious downward spiral.
We can see this kind of devastation in the 2008 financial crisis. It originated in the swelling of subprime mortgage markets, which realtors relished at first. However, things soon turned ugly, as home prices skyrocketed and wreaked havoc on the market.
Initially, the problem was contained to the U.S., but it soon spread overseas, and the consequences were quite dire. The entire U.S. investment industry saw itself turned on its head, and several banks and mortgage lenders went under. Financial institutions were not the only ones to suffer during the crisis since banks ceased giving out loans to businesses in various other industries.
The Biggest Risk for Global Economy – The Zero Interest Rate Effect
The history of global debt
Since 2008, the debt situation has been increasingly concerning. The bulk of public debt currently stems from five countries. Greece, Italy, Lebanon, Japan, and Portugal are accountable for 66% of the global debt.
To learn more about the nature and history of global debt, feel free to check out this terrific infographic, brought to us by F
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