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The Global Debt Bubble is Waiting to Burst

March 23, 2020

Debt all over the world has been exploding.


The behavior isn’t going to change. So, the question is – when will the bubble burst and spark a crisis?


While final numbers aren’t in, forecasts show worldwide debt topped $255 trillion, which is a new record by a long shot. The debt is owned by consumers, governments, and financial corporations, not including banks.


All debts of mature nations like the U.S. and Japan exceeded $180 trillion in the latest figures from September 2019. That’s 380 percent of mature countries’ gross domestic product (GDP).


The story is the same in emerging market countries like China and Brazil. There, debt topped $72 trillion, which is 223 percent of GDP.


Adding fuel to the fire, an estimated $19 trillion of bonds and loans will mature in 2020. If any major borrowers default because they can’t refinance, we could be in for a wild ride.


At home, our own ever-mounting debt currently stands around $23 trillion. And the Congressional Budget Office projects annual $1 trillion budget deficits for the next decade.


So, if nothing changes within the next 10 years, our debt will exceed $33 trillion. Yet, politicians keep spending. Federal debt increases every year, regardless of debt ceilings, sequestrations, or anything else. And we don’t seem to care because we keep re-electing spenders.


But it’s not just politicians. It’s all of us.


Household debt topped $14 trillion for the first time.


Mortgage balances rose $433 billion.


Student loans top $1.5 trillion. Almost 45 million people have balances, with more than 600,000 adults owing $200,000 or more.


Auto debt climbed to $1.2 trillion.


Credit card debt rose to $1.1 trillion.


There is no stopping the spending.


Perhaps an unprecedented financial crisis will bring it to an end.

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This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. Please consult with a professional specializing in these areas regarding the applicability of this information to your situation.

Andrew Wood, Dan Simon and Alison Slezak are Investment Advisor Representatives. Advisory services are offered through CoreCap Advisors, LLC., a Registered Investment Advisor. CoreCap Advisors, LLC and Daniel A. White & Associates, LLC are separate & unaffiliated entities. 

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