Sage Investment Club

(Bloomberg) — The world is at risk of a crisis as governments, households and financial institutions binge on debt, a habit that S&P Global Ratings warns could push overall leverage to 366% of global gross domestic product by 2030.That would mark a sharp increase from the world’s $300 trillion pile of debt — or 349% of global GDP — as of June 2022, as leverage rises slightly faster for mature economies than emerging peers, S&P’s Terry Chan and Alexandra Dimitrijevic wrote in a report. “Demand for debt — to help consumers with inflation, mitigate climate change and rebuild infrastructure, for example — will continue,” they wrote. “To mitigate the risk of a financial crisis, trade-offs between spending and saving may be needed.”Rising interest rates over the past year as the Federal Reserve and European Central Bank battle inflation have made debt burdens heavier. Assuming that about 35% of the world’s debt has a monetary policy-sensitive floating rate, last year’s hiking cycle added another $3 trillion in debt servicing costs, according to S&P.“There is no easy way to keep global leverage down,” Chan and Dimitrijevic wrote.©2023 Bloomberg L.P.

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