Debt Alert!



POSTED BY Ed (7 days ago)
“The true scale of global debts has been revealed in a study of borrowing around the world, showing a total burden of $243 trillion (£179 trillion).

“Governments rich and poor have piled up unprecedented mountains of borrowing, while companies and households have also been warned that they are dangerously indebted.

“The study from the International Monetary Fund has compiled what it believes to be the most comprehensive database of public and private debts with information going back to the Fifties.

“It shows debts have risen in an almost unbroken trend since the Second World War, as even when some parts of the world cut back a little, deleveraging barely made a dent in the loans built up in earlier years.

“And when the rich world cut borrowing after the financial crisis, emerging markets, and China in particular, ramped up borrowing…

“Running up debts now risks leaving the cupboard bare when a crisis strikes…

“Debt growth has spread far beyond governments, with families and small businesses in the US also a particular hazard.

““The bottom 50pc [of US households] have negative net worth, they are already in distress,” said Hung Tran, executive managing director at the IIF, describing families whose debts exceed their assets.

“He said small companies are also in distress. The median small-cap US firm has an interest coverage ratio of zero – which means its earnings only just cover its interest payments.

“That is a marked worsening in the past six years, and indicates half of small firms are struggling to service their debts even before interest rates rise back to more “normal” levels.”

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