Do it yourself

Continuing from Friday (see Slipping back into deep abyss ) Two of the key questions that are begging answer from the central bankers infusing trillions of dollars in fresh liquidity in the global financial system and the governments borrowing incessantly to further their populist agenda, is what will be the impact of this debt burden on the potential economic growth? and How the perpetually slow growth will impact the demography, i.e., whether the world will follow the demographic trends of Japan and grow old? (see How will this tiger ride end? ) As per the World Bank report titled Global Waves of Debt - Causes and Consequences , "Amid record high global debt, low interest rates and subpar growth have led to an intense debate on whether the recent rapid increase in debt is reason for concern. Some argue that countries, especially those that issue reserve currencies, should take advantage of low interest rates to borrow more to finance priority expenditures. Oth...

Continuing from last week ( see How will this tiger ride end? ) As per various reports, central banks and governments worldwide have unleashed more than $15 trillion of stimulus to counter the economic slowdown caused by the outbreak of COVID-19 virus. Considering that the global economy had still not recovered fully from the global financial crisis (2008-09), this slowdown appears much more serious. It is like a cancer patient relapsing after responding to the treatment and showing some signs of recovery. As per the estimates made by the Institute of International Finance estimates (IIF), total global debt has risen $87 trillion since 2007. Out of this government debt accounts for about $70 trillion, while the rest is private debt. The IIF estimates show that the total global debt may rise year to over 340% of the global GDP, assuming moderate recession of 3% in Global GDP. A more severe decline in economic activity will of course make the situation worse. The questio...

A large part of global economic and financial research these days is focused on the burgeoning debt at all levels - government, business and household. The global government debt is now estimated to be 105% of global GDP and is still rising briskly. In the year 2020 itself the global government and private debt burden may increase by US$200trn, approximately 35% of global GDP. According to Bank of International Settlements, the percentage of companies with less than one interest coverage ratio has exploded since the global financial crisis (GFC). This number is witnessing sharp rise in the wake of COVID-19 led economic crisis. In Indian context also, we have seen sharp rise in fiscal deficit (rise in government debt); corporate debt and household debt. Also, the quality of debt has deteriorated materially at all levels. The ratio of India’s public debt to GDP is expected to scale a new high at the end of FY21 due to record borrowing by the central and state governments and...