By Pam Martens and Russ Martens: September 30, 2014
U.S. Total Debt by Sector, 1916 to 2014, from International Center for Monetary and Banking Studies and CEPR
Four noted economists have issued a report under the umbrellas of the International Center for Monetary and Banking Studies and the Centre for Economic Policy Research (CEPR) that is raising alarm bells at global central banks.
According to the report: “The world is still leveraging up; an overall, global deleveraging process to bring down the total debt-to-GDP ratio – or even to reduce its growth rate – has not yet started. On the contrary, the debt ratio is still rising to all-time highs.”
This, say the authors, has produced an “ongoing vicious circle of leverage and policy attempts to deleverage, on the one hand, and slower nominal growth on the other,” setting the basis “for either a slow, painful process of deleveraging or for another crisis, possibly this time originating in emerging economies (with China posing the highest risk).”