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Slow Global Economic Growth And Risk Of Market Pandemonium Arises As World Debt Increases To 199 Trillion Dollars

by Czarelli Tuason / Oct 17, 2015 05:20 AM EDT
Global currencies | By: Alex Slobodkin | Getty Images

The world debt reportedly increased by nearly $60 trillion putting it at a total of $199 trillion, or 287 percent of the global GDP, suppressing global economic growth and increasing risk of market pandemonium, reported Aljazeera on Oct. 11.

Since the financial crisis in 2008, global debt has been a hot news in years and a graph constructed by Meryll Lynch, an analyst at the Bank of America, showed that there is hardly any deleveraging occurring globally. The Bank of America considers the graph an apparent evidence that "the world is still in love with debt," noted Business Insider on Thursday.

Some deleveraging, particularly in households, may be observed in developed countries, such as in the United States, Ireland and United Kingdom. But the figures have been offset by increases in the emerging markets.

Analysts attribute most of the increase in global debt to non-financial corporate debt, which have been observed to increase by 63 percent mostly in emerging markets. Analysts Ken Rogoff pointed that debts are the main cause for the sluggish global growth more than a perpetuating demand deficiency or secular stagnation.

"Actually, there can be little doubt that a debt super cycle lies behind a significant part of what the world has experienced over the past seven years," explained Rogoff. "This resulted first in the US subprime crisis, then the Eurozone periphery crisis, and now the troubles of China and emerging markets."

On Aug. 6, Visual Capitalist revealed a visualization of the $59.7 trillion global debt by country. The pie chart showed that the U.S. accounts for most of the debt at 29.05 percent, despite contributing to 23.3 percent of the world economy.

This is then followed by Japan owning 19.99 percent of the global debt and contributing only 6.18 percent to the total economic production, while China accounts for 6.25 percent of the world debt and contributing 13.9 percent to economic production.

Overall, combining the debt of the U.S., Japan and Europe makes up 75 percent of the global debt.

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