Once the Coronavirus Is Defeated, the $277T Global Debt Will Be an Even More Dangerous Enemy
Global debt is increasing at an absolutely unprecedented rate. All observers agree on this. Last week, the Institute of International Finance (IIF) confirmed it:
“The pace of global debt accumulation has been unprecedented since 2016.”
The Institute of International Finance (IIF) published chilling figures in its latest Global Debt Monitor.
Global debt reaches $277 trillion and seems out of control
The world debt has become parabolic and will reach 277,000 billion dollars by the end of 2020. In just a few months, due to policies to support the economy to cope with the coronavirus pandemic, this debt has increased by more than $15,000 billion.
This represents 365% of the world’s GDP.
Even at the end of the Second World War, financial commitments had not reached such a level as a proportion of GDP.
The IIF does not mince words when it talks about the “tsunami of debt”. This is indeed the reality of the world in 2020, but it is always more impressive when an institution like the IIF says it in such a brutal way.
From 2016 to 2020, the world’s debt increased by $56 trillion. This is ten times more than the increase observed by the IIF from 2012 to 2016. When I talk about the global debt that has become parabolic, you can see that this only reflects the reality of the numbers.
In this year 2020, we’ve gone from billions of dollars to trillions of dollars. This is proof that the magnitude of the problems continues to grow. In fact, many people find all these numbers abstract. You get used to these numbers by hearing them and you don’t worry about them anymore.
All these figures seem unreal to the general public
To help you better visualize what this global debt represents, let me give you a telling example.
Let’s say you want to know what one million dollars represent. Counting a dollar every second, it would take you 11 days to reach one million dollars. For a billion dollars, it will take you 31 years.
If you want to count the $15 trillion increase in global debt by 2020 that way, it will take you 465,000 years. To have finished counting it by the time I write this, you should have started before the appearance of modern Homo sapiens in Africa.
Finally, to fully count the world’s $277 trillion debt, you should have started 8,587,000 years ago. At that time, at the height of the Tertiary era, the Australopithecus did not even exist yet.
This quick example should allow you to understand how worrying the current situation is although we have become accustomed to hearing these figures too often.
Many countries may go bankrupt in the coming months
Among the advanced nations, the debt increased by 432% as a proportion of GDP in the third quarter. An increase of +50% compared to the same period in 2019. The United States, which has implemented the biggest stimulus packages in the world, alone accounts for half of this increase.
The US public debt now exceeds $27,200 billion.
Behind the United States, Japan, Italy, France, and the United Kingdom are among the most indebted countries in absolute terms. China is probably in this top group, but Beijing does not provide any real figures in this area.
Even so, these developed countries can still cope.
The most worrying concerns the emerging countries. Debts have increased by 248% of GDP in Lebanon, Malaysia, or Turkey. These countries obviously do not offer the same guarantees as the countries mentioned above.
Six countries have already gone bankrupt in 2020.
Zambia is the most recent. The international community has already proposed to freeze part of the repayments owed by the 73 poorest countries. But this will clearly not be enough this time. As with every major crisis, debt forgiveness will be necessary.
A global debt crisis threatens to erupt in the coming months.
This global debt will be an even tougher opponent than the coronavirus pandemic
While everyone is focused on the coronavirus pandemic right now, the real danger to the global economy lies elsewhere. On November 12, 2020, Pfizer announced that its coronavirus vaccine was 90 percent effective. It was the beginning of the first war of announcements between two pharmaceutical companies.
Moderna then announced that its vaccine was 94.5 percent effective. Then Pfizer said that following more complete results from its test phase, the effectiveness of its vaccine rose to 95 percent.
While this war of numbers makes sense because the financial stakes are so high for these companies, which have been working for months to produce an effective coronavirus vaccine, the important thing is that an effective vaccine can be produced.
Such a mass-distributed vaccine would end this coronavirus pandemic for good. It will still take several more months, but the end of the tunnel is approaching.
As soon as the coronavirus pandemic will be truly under control, the economic situation will return to the forefront, and that is when the worst could happen.
The global debt that has become parabolic in the last four years will be an even more dangerous adversary than this coronavirus pandemic has been.
The unlimited printing of fiat money out of thin air by central banks, which facilitates the endless increase of debts, cannot remain without consequences indefinitely. Sooner or later we will have to pay for these abuses. The current monetary and financial system is more than ever on the verge of collapse.