Mosaic collection of world currencies.
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Economist Arthur Laffer Jr. warns that the world is facing a debt crisis that will last 10 years and that it will not end well as global borrowing increases. Record $307.4 trillion Last September.
Debt has increased significantly in both high-income countries and emerging markets, with debt reaching $100 trillion higher than a decade ago, partly due to the high interest rate environment.
“I predict the next 10 years will be the decade of debt. Global debt is about to peak. It’s not going to end well,” Laffer, president of investment and wealth advisory firm Laffer Tengler Investments, told CNBC.
Debt as a share of global gross domestic product has risen to 336%. This is related to The average debt-to-GDP ratio is 110% For developed economies in 2012, 35% for emerging economies. According to the latest Global Debt Monitor data, the figure was 334% in the fourth quarter of 2022 Report By the Institute of International Finance.
In order to pay off debts, It is estimated that approximately 100 countries Spending on critical social infrastructure, including health, education and social security, will have to be cut.
Laffer said that countries that can improve their fiscal situation can benefit by attracting overseas labor, capital and investment, while those that cannot improve their fiscal situation may lose talent, income, etc.
“I expect there will be a slow fiscal death in some big countries that don’t address their debt problems,” Laffer said, adding that some emerging economies “will probably go bankrupt.”
Mature markets such as the United States, the United Kingdom, Japan, and France More than 80% of debt accumulated first half of last year. In terms of emerging markets, China, India and Brazil have seen the most significant growth.
The economist warned that as populations in developed countries continue to age and labor becomes more scarce, servicing debt will become more of an issue.
“There are two main ways to solve this problem: raise taxes or let the economy grow faster than the debt piles up,” he said.
Laffer’s comments came after the Federal Reserve decided to keep interest rates unchanged in January and gave up hopes of a rate cut in March.
