The economy all over the world has been becoming digital. There are some flipsides to this shift. Buying online has increased the habit of taking loan.
The result? Total debt around the world has seen a 40% increase. The current global debt amount is $100 trillion. From the time of recession, this figure has been rising up.
In mid 2007, total debt around the world was $70 trillion. In 2013, it soared to $100 trillion. One factor that needs to be tallied with this increase is $3.86 trillion decline in equity value. The value of equity was $57.66 trillion before. Then it climbed down to $53.8 trillion.
The finding came from a set of data compiled by Bloomberg. The increase in debt is twice the volume of US economy. It was measured by Bank for International Settlements and Basel Committe on Banking Supervision.
Taking loan has increased and the benchmark interest rate had been suppressed by the central banks to boost growth after the bankruptcy of Lehman Brothers Holding Inc.
The worrisome fact is income return on investment is down more than 4.8% from the 2007 figure. It applies to all forms of bonds. The average yield is only 2%. The data is from Global Broad Market Index of America Merrill Lynch.
An analyst name Branimir Gruic said, “Given the significant expansion in government spending in recent years, governments [including central, state and local governments] have been the largest debt issuers.”
Outstanding US government debt was $4.6 trillion in 2007. The debt soared to $12 trillion in recent time. Sale of corporate bonds have also increased and the amount of debt issue has soared to $21 trillion. The finding is based on US Treasury data compiled by Bloomberg.
Nations with high debt margin are worried that global investors may not interest in their markets. An economist called Holger Schmieding said, “To get out of debt, you need prudence and you need pro-growth structural reforms.”
To fight this out, countries are discouraging interest payment in their budgets. One finding that came out is that the demand for fixed income assets is still intact. A credit strategy maker name Ben Bennett said, “Total debt levels, the sum of household, government and corporate debt, haven’t declined at all in recent years”
“Each time there’s a wobble, the central banks turn on the taps. Either that works by creating growth with asset prices eventually coming into line with fundamentals or it doesn’t, and we’re in for a massive fall.” He added.