Every person in the world is somehow involved in the world’s total debt. Experts tend to point out the mind-blowing US federal debt. However, the world’s total debt has reached the highest ever amount in history. Nowadays, it stands at $307 trillion or 336% of global gross domestic product, the Institute of International Finance says.
Global debt is the overall borrowings by individuals, businesses, financial institutions, governments, and households in all countries. Experts insist that not a single person has avoided borrowing. According to the estimates of the Institute of International Finance (IIF), global debt expanded by $10 trillion in the first half of the year. Moreover, it has swollen to $100 trillion in the last decade. Interestingly, global debt has snowballed for two quarters straight, though it has been declining for seven quarters in a row before 2023.
The reason behind such a humongous debt burden is the monetary policies of major central banks. Previously, people and businesses actively borrowed, taking advantage of low interest rates. Accommodative monetary policy was meant to make loans more affordable for citizens on the one hand and to encourage business activity and economic growth on the other hand. In practice, this policy fomented excessive debt levels in a variety of countries. First and foremost, it affected large lenders themselves, namely, the US, Japan, and the EU. Gita Gopinath, First Deputy Managing Director of the International Monetary Fund said in September that mounting trade restrictions jeopardize global prosperity and lead to fragmentation of the world economy. She cautioned that emerging markets are especially vulnerable to this perilous trend because some economies could incur losses of 10% of their GDP.