Global Debt Hits Record High of $307 Trillion
A new study by the Institute of International Finance (IIF) reports that global debt has reached a new high of $307 trillion. However, this category leaves out financial derivatives, which are an estimated five times as much to be added to that sum, bringing the total outstanding financial aggregates to close to $2 quadrillion, according to EIR’s estimates.
A Sept. 19 article in the Financial Times notes that “Total debt — spanning sovereigns, corporates and households — rose by $10 trillion to about $307 trillion in the six months to June, the IIF said in its global debt monitor report published Tuesday [Sept. 19]. The previous peak for global debt was in early 2022, before central banks started aggressively raising interest rates.” Over 80% of the additional debt in those six months came from “mature markets, with the US, Japan, UK and France registering the largest increases”.
The IIF admits that the rise in interest rates, led by the United States Federal Reserve, has a lot to do with the recent run-up. The lead author of the report, Emre Tiftik, is quoted in the FT article saying that “Our concern is that countries will have to allocate more and more to interest expenses. It will have long-term implications for countries’ funding costs and debt dynamics.”
Edward Parker, managing director at Fitch Ratings, issued a similar warning, according to FT. “Rising interest bills are a key risk to public finances and sovereign ratings, particularly in developed markets,” he said. When interest rates were very low during QE, debt service payments didn’t rise. “But that free lunch is over and interest payments are now rising faster than debt or revenue.”
Despite the disastrous effect high interest rates are having on the physical economy, the OECD put out a new report, calling on the central banks of Western nations not to lower them. And indeed, that is just what the Federal Reserve’s FOMC meeting decided on Sept. 20.