Global debt has grown by $57 trillion or 17
percentage points of GDP or worldwide income since 2007, to stand at $199 trillion,
equivalent to 286% of GDP, said McKinsey Global Institute.
After the explosion of borrowing in the boom years
that led to the great crash and recession of 2007-08, most governments -
especially those of rich developed countries - said they would embark on
policies that would lead to greater saving, debt reduction and what's known as
deleveraging, said the influential consultancy.
They implied they would encourage prudence, so that
the sum of household, business and government debt would fall.
The single biggest contributor to the rise and rise
of global indebtedness is that government debts have increased by $25tn over
these seven years, said MGI.
What is striking is that of 47 big economies, only
five - Israel, Egypt, Romania, Saudi Arabia and Argentina - have actually
succeeded in reducing their debts.
But a further five have seen massive increments in
their indebtedness: the debts of China have risen by 83 percentage points,
Portugal's by 100 percentage points, Greece's by 103 percentage points,
Singapore's by 129 percentage points and Ireland's by 172 percentage points.
McKinsey argues that China's central government does
have the financial capacity to cope with a fully fledged financial crisis. It
calculates that even if half of property related loans defaulted and lost
four-fifths of their value, any financial rescue would see government debt
rising to around 79% of GDP - which would be roughly equivalent to the UK's
current public-sector indebtedness.
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