– Global debt bubble hits new all time high – over $237 trillion

– Global debt increased 10% or $21 tn in 2017 to nearly a quarter quadrillion USD

– Increase in debt equivalent to United States’ ballooning national debt

– Global debt up $50 trillion in decade & over 327% of global GDP

– $750 trillion of bank derivatives means global debt over $1 quadrillion

– Gold will be ‘store of value’ in coming economic contraction

– Global debt is the mother of all bubbles

Source: Bloomberg

Global debt has now reached over 327% of global GDP, $237 trillion. Prior to the financial crisis it was less that $150 trillion. The amount by which it has surged in just one year is the same amount as the ballooning national debt of the United States.

The response of our leaders, central bankers and financial thinkers to this latest data?

It was good news as it showed that thanks to global growth the ratio of debt-to-gross domestic product fell for the fifth consecutive quarter. No irony in the fact that the economic growth is entirely funded by debt itself – adding another shaky layer to the house of cards.

Christine Lagarde said earlier this week:

The bottom line is that high debt burdens have left governments, companies, and households more vulnerable to a sudden tightening of financial conditions. This potential shift could prompt market corrections, debt sustainability concerns, and capital flow reversals in emerging markets.

A sudden tightening of financial conditions is inevitable. The latest FOMC minutes released yesterday showed that members plan to increase interest rates at a faster rate than previously expected. This was inevitable given the loose monetary policy that central banks have been enjoying for the last decade.

As Jim Rickards summarises:

We hear that the U.S. is facing a debt crisis because budget deficits are out of control. We hear that China is facing a debt crisis because of wasted infrastructure investment, bank Ponzi schemes and bad loans to money-losing state-sponsored enterprises.

Next we hear that emerging markets are facing a separate debt crisis because of dollar-denominated debt that cannot be repaid if higher U.S. interest rates lead to a stronger dollar.

In short, the whole world seems to be facing a debt crisis in various forms.

Global debt is primarily made up of three groups: non financial corporates, governments and households. Each as indebted as the next, each as addicted as the next with no detox programme on offer.

 

Rickards reminds us that $237tn is only part of the story:

This debt is in addition to approximately $750 trillion of bank derivatives as reported by the Bank for International Settlements (BIS).

Adding the debt and derivatives together produces over $1 quadrillion of financial obligations of various kinds. This is far more that the amount of debt and derivatives outstanding before the last financial crisis in 2008.

So bad is the debt crisis that five leading economists recently felt compelled to write an op-ed in the Washington Post warning Americans of the impending debt crisis.

From this point forward, even if economic growth continues uninterrupted, current tax and spending patterns imply that annual deficits will steadily increase, approaching the $1 trillion mark in two years and steadily rising thereafter as far as the eye can see.

Unless Congress acts to reduce federal budget deficits, the outstanding public debt will reach $20 trillion a scant five years from now, up from its current level of $15 trillion. That amounts to almost a quarter of million dollars for a family of four, more than