Financial Times: Global Debt Surges to Highest Level in Peacetime

September 25, 2019

Article by Tommy Stubbington in Financial Times

The level of government debt around the world has ballooned since the financial crisis, reaching levels never seen before during peacetime.

A Deutsche Bank analysis shows the world’s major economies have debts on average of more than 70 per cent of GDP, the highest level of the past 150 years except for a spike around the second world war — raising profound questions about the sustainability of the global debt pile.

“The problem in sustainably recreating such a scenario today is that the post-WWII era saw much higher levels of GDP growth due to favorable demographics, post-war reconstruction and high productivity growth,” said Deutsche’s Jim Reid.

Mr. Reid argues we are likely to see central banks continue market interventions that have enabled governments to take on more debt since the crisis, perhaps even financing spending directly with so-called “helicopter money”.

“We’re actually not a million miles away from this,” he said. “By their aggressive actions over the last decade, central banks have effectively trapped themselves into continually intervening in government bond markets. They’re arguably beyond the point of no return.”

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