Debt Clocks Tell the Story: Vicious Upward Debt Spiral Gaining Momentum ? Take a Look (2.1K Reads)
Lorimer Wilson on 2018-12-28 17:14:42.0
A vicious upward debt spiral is gaining momentum. The budgets of most advanced economies, excluding interest payments, need 20 consecutive years of surpluses exceeding 2% of gross domestic product ? starting now ? just to bring the debt-to-GDP ratio back to its pre-crisis level.
By Lorimer Wilson, editor of munKNEE.com - Your KEY To Making Money!
As accessed from Wikipedia, according to the Bank for International Settlements, if only one of the following three events were to occur, the increased financial burden imposed by ageing populations and lower growth would make it very unlikely that indebted economies would be able to grow out of their debt problem:
government debt is more than 80% to 100% of GDP;
non-financial corporate debt is more than 90%;
private household debt is more than 85% of GDP.
The Boston Consulting Group (BCG) adds that if the overall debt load continues to grow faster than the economy, then large-scale debt restructuring becomes inevitable.
To prevent a vicious upward debt spiral from gaining momentum the authors urge policy makers to:
act quickly and decisively
aim for an overall debt level well below 180% for the private and government sector
based on the assumption that governments, nonfinancial corporations, and private households can each sustain
a debt load of 60% of GDP,
at an interest rate of 5% and
a nominal economic growth rate of 3% per year. Lower interest rates and/or higher growth would help reduce the debt burden further.
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