Here is yet another gold and silver bull market catalyst: global debt is about to hit a jaw-dropping $100 trillion. That is a mind-boggling figure. Take a look…
A $100 Trillion Problem
October 23 (King World News) – Gerald Celente: Worldwide public debt will exceed $100 trillion before this year is over, rising to 93 percent of the globe’s total economic output, according to a new study by the International Monetary Fund (IMF).
Debt has risen steadily since the Great Recession. Central banks held interest rates low, which encouraged governments to borrow for infrastructure, social programs, and other uses.
When the COVID era arrived, debt soared as governments sold bonds to subsidize businesses, make cash grants to households, and keep their economies alive during lockdowns as they also paid the vast expenses of fighting the virus and caring for the sick.
Russia’s attack on Ukraine piled on even more debt as European governments subsidized suddenly higher energy bills for businesses and households.
The new projection puts government debt on track to exceed the world’s total economic output by 2030. That line could be crossed sooner if global economic growth slows or interest rates rise, the agency said.
In a worst-case scenario, governments’ debt could climb to 115 percent of global GDP in 2026, with U.S. debt ballooning to 150 percent of its economy.
In 2000, U.S. public debt was 60 percent of GDP and has more than doubled since then, the IMF noted.
Countries often underestimate the rate at which their debt grows, the IMF’s report noted.
The estimates tend to fall short by an average of six percentage points over three years.
Countries producing about two-thirds of the world’s economic activity hold half of global debt and that debt will continue to rise, the IMF warned.
Brazil, China, France, Italy, South Africa, the U.K., and the U.S. are particularly susceptible to the rising tide of red ink, the agency said.
“Countries should confront debt risks now with carefully designed fiscal policies that protect growth and vulnerable households while taking advantage of the monetary policy easing cycle,” the IMF’s Fiscal Monitor report urged.
With inflation easing and central banks cutting interest rates in Europe, the U.K., and U.S., “now is an opportune time” for those areas to address excess debt, it added.
That would involve spending cuts or tax increases, or a combination of both, equal to 3 to 4.5 percent of countries’ GDPs over the next five to seven years.
“For all countries, a strategic pivot is needed to reduce debt risks,” Era Dabla-Norris, the IMF’s deputy director for fiscal affairs, said in comments quoted by The Wall Street Journal.
China is issuing a flurry of new bonded debt to try to jump-start its economy. In the U.S., both major presidential candidates have made proposals that would grow the national debt by anywhere from $4 trillion to $15 trillion over 10 years, analysts have calculated.
Concerns about rising debt recently triggered bond sell-offs in France and the U.K., the Financial Times reported.
TREND FORECAST:
For the world’s governments, borrowing has become second nature. Paying the debt back has not.
The U.S. Congress formed a Joint Select Committee on Deficit Reduction in 2011 to deal with federal debt and prevent future crises when spending approached the debt ceiling.
History shows us how much good that did and also tells us how quickly and easily Congress can ignore its responsibilities.
Other Western governments have made similar gestures but debt has continued to rise.
As we said in “Global Debt Sets New Record at $315 Trillion” (14 May 2024), the current trend of spending deeper into debt will continue until another national or global financial crisis threatens to plunge the world into an economic death spiral.
Even at the current level of debt danger, developed economies will see more banks fail, more households claim bankruptcy, consumers able to buy less, and economies slowing further, with more falling into recession and staying there longer.
Populist movements fueled by grievance and victimhood, such as America’s MAGA movement, will, as we have long forecast, keep gaining strength.
Emerging nations will fare worse.
Many of those economies survive by exporting timber, minerals, and other resources. A puckered global economy requires less of those inputs, as we saw during the COVID War.
Several emerging nations already are struggling to repay massive debt and are pleading with the International Monetary Fund for loans. A few countries, such as Sri Lanka and Zambia, already have defaulted.
As defaults throw developing economies into turmoil, people increasingly will take to the streets to protest government incompetence, corruption, crime, and violence. Social and political chaos will boil, all part of our long-range Top Trend of New World Disorder.
These events will, in turn, drive more people from their home countries to seek refuge in safe-haven nations—and in those nations where they seek refuge, there will be growing anti-immigration, anti-establishment, populist movements to stop the refugees from entering their nations…
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