The world is staring at a giant pile of government debt worth $226 trillion.
It represents the biggest surge in borrowings since World War II.
Japan's situation is particularly alarming. It has borrowed more than $9 trillion, around 230 percent of its GDP.
For two years, poor countries worldwide have been encouraged to take on record amounts of debt, which is now throwing many into default.
With debt interest payments becoming more expensive, the World Bank and IMF say more than a dozen or so countries will go into default over the next 12 months.
Officials in countries like Sri Lanka now face a stark choice — feed their hungry people or default on their debts.
The real sleeping giant in all this is China. China’s debt is 290 percent of its GDP according to the Bank of International Settlements. That’s higher than any other major economy in the world, including the US.
China’s debt-to-GDP ratio is growing at a rate of 11 percent per year — which means its debt is outpacing its GDP growth.
China’s state-owned banks, meanwhile, are sitting on mountains of bad debts and non-performing loans.
Bad loans alone hit $581 billion in 2021. And that is just what’s visible.
Not included are $990.22 billion in non-performing loans carried by banks as "special mention loans", which are in danger of default.
Over 70 percent of these non-performing loans have been bundled up and resold to investors at inflated prices.
More murky debt can be found in China’s shadow banking sector where $13 trillion of lending is done through non-traditional financial institutions.
Then there is China’s local government debt which official figures put at $3.97 trillion, but which Goldman Sachs says could be as high as $8.2 trillion, nearly half China’s GDP.
The list of Chinese property developers defaulting is now snowballing. The sector has serious liquidity problems and $117 billion worth of debt maturing this year.
Banks won’t lend to them, new projects have ground to a halt and unfinished infrastructure projects are being demolished.
Global pension funds and institutional investors who have invested $2.1 trillion in Chinese companies are all at risk.
Anyone who likes a good horror story should read AFR’s article on "Why your super is making the long march to China"!
If China’s economy collapses, it will wipe Australia out, along with many of its people’s super nest eggs.
And yet, hardly anyone is talking about this.
Financial 'experts' instead say that 'debt' is a good thing and Australia needs more of it!
Seriously in any normal, functioning meritocracy, these people would all be pushing trolleys at Coles, not steering our economy.
The fact they are should keep every Australian up at night.
It does me.