According to the Bank for International Settlements (BIS), this is the value of the global debt. Let’s see what this exactly mean and what could be its real effects….
Now the word "debt" has become a structural part of our society. We go into debts for everything: to buy something that we cannot pay in cash (hire purchase), to buy something that we can pay in cash (but do not want to pay in cash), to repay our previous debts (the States and the victims of loan sharks know well this situation), to pay the interest on our debts, etc. ... In short, debt after debt you get to produce and earn wealth merely to repay your debts.
What is the final result of this endless process? Global Debt (of public and private entities) has rached the amount of U.S. $100,000 bn… Please pay attention to the fact that we are talking of billions (not millions)… To give you an idea of its size, the value of the global debt is one and a half times the value of the global Gross Domestic Product (GDP) (about U.S. $73 bn in 2013) and that the U.S. GDP (the sum of all incomes of Americans) is about 16 trillion dollars. In order to give you a more concrete thought on the phenomenon, suppose a person who gains €1,000 per month; if that person has a debt equal to one and a half times his income, it means that his debt is worth 1,500 Euros. You might be thinking to repay by installments, but the problem is that your creditors are requiring interests on the money they have lent to you and if the repayments are lower than these interests, the debt will inevitably grow. This is what has happened in several states, including Italy, whose debt is composed almost exclusively by the accumulation of interests over the past 30 years (Francesco Gesualdi, chains of debt, 2013, p. 20).
But the big amount of the global debt is not the only problem. Global debt is steadily growing: in the middle of 2007 (the year when the financial crisis broke out) it was just $70,000 bn; now it si $100,000 bn (a 40% increase).
This increase in the global debt (that, as said above, comes from both public and private operators), the States have played the lion’s share in order to both save their local banks and foster the economic recovery: in the United States the government debt passed from $4,500 bn in 2007 to $12,000 bn in 2013 (in Italy public debt has now exceeded €2,000 bn, about 130% of its GDP).
According to the latest BIS’ quarterly review (III quarter 2013), governments borrow mainly in domestic market: as for the III quarter of 2013 the governments domestic debts amounted to 43 trillion dollars, 80% more than in mid-2007 (pink area in the graph). In second place for amount of debt issued, there are financial corporations: in total in June 2013 their debt was about 41 trillion dollars (23,600 billion coming from the domestic market and 16.2 from the international market); however, compared to 2007, the debt was slightly lower, but the ten-year growth is very high (from 23.4 trillion in the second quarter of 2003 to 39.8 in the second quarter of 2013). Finally, the debt of non-financial corporations (firms) is about $13 trillion and has grown over the past 6 years.
International agencies, governments, academics and policymakers all should pay great attention to the data on the dynamics of global debt. A world built on the basis of debt will only lead to an increase in global imbalances between countries and, in particular, between debtors and creditors institutions. On the other hand, citizens should follow some rules in their spending and financing behaviors: avoid impulsive buying and spend just what one can afford. That doesn’t mean you must be austere with yourself, but you must take back control of your mind, decision-making power, and so your budget.
Graph – Global Debt by debtors
$tn, Iq2001- IIq2013
Source: LTEconomy, elaboration on BRI data
LTEconomy, 21 March 2013
From the Bank for International Settlements (BIS)