Public and Private Debt at All Time Highs

Public and Private Debt at All Time Highs

Public and Private Debt at All Time Highs

$DIA, $SPY, $QQQ, $VXX

Worldwide public and private debt is at an all-time high, that is a substantial impediment to getting global economic growth back to normal, according to the International Monetary Fund (IMF).

The easy money policies of the world’s top central banks has fueled the problem, stoking a private-sector credit surge in China and rising public debt in some low-income countries.

Slow economic growth is making it hard for companies and countries to cut their debt burdens, a process that drags on growth momentum because deleveraging companies slow spending and investment.

Without deleveraging countries run the risk of fresh financial crises that can turn into deep recessions, the IMF’s Fiscal Monitor report says.

“For a significant deleveraging to take place, restoring robust growth and returning to normal levels of inflation is necessary.”

Getting there requires governments to stimulate growth though investment, certain fiscal and business reforms, and targeted programs to help heavily indebted companies lower their debts.

“Global debt is at record highs and rising,” the IMF’s Fiscal Affairs Department Chief said.

Public and private debt, excluding the financial sector’s, at the end of last year hit $152-T, with around 67% owed by the private sector, the report said.

Measured against the size of the world economy, it rose from less than 200% of global GDP to 225% over the 15 years to Y 2015.

Debt at such levels while economic growth remains tepid heightens the risk of financial crises.

“High debt levels are costly as they often end up in financial recessions that are deeper and longer than normal recessions,” he said in comments accompanying the report.

Excessive private debt is a major headwind against the global recovery and a risk to financial stability.

While central banks have had to cut interest rates to support the recovery from the Y 2008 financial crisis, that has encouraged the debt pileup, the report said.

Dealing with the problem requires governments to implement well-calibrated programs to reduce private debt by cleaning up poor balance sheets of EU banks and non-financial companies in China.

“Generally, where the financial system is under severe stress,” the report said, “resolving the underlying problem quickly is critical.”

Wednesday, the US major stock market indexes finished at: DJIA +112.58 at 18281.03, NAS Comp +26.36 at 5316.02, S&P 500 +9.24 at 2159.73

Volume: Trade came in heavy at 962-M/shares on the NYSE

  • Russell 2000: +9.9% YTD
  • NAS Comp +6.2% YTD
  • S&P 500: +5.7% YTD
  • DJIA +4.9% YTD
HeffX-LTN Analysis for DIA: Overall Short Intermediate Long
Neutral (-0.04) Neutral (-0.18) Neutral (0.04) Neutral (0.03)
HeffX-LTN Analysis for SPY: Overall Short Intermediate Long
Neutral (-0.02) Neutral (-0.17) Neutral (-0.08) Neutral (0.19)
HeffX-LTN Analysis for QQQ: Overall Short Intermediate Long
Bullish (0.32) Neutral (0.21) Bullish (0.46) Bullish (0.29)
HeffX-LTN Analysis for VXX: Overall Short Intermediate Long
Bearish (-0.32) Bearish (-0.29) Bearish (-0.33) Bearish (-0.33)

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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