IMF Sounds the Alarm

alarmIn addition to reporting on the dangers facing global banks as a result of declining profits in the current low rate environment, this past month the IMF (International Monetary Fund) also released its latest Fiscal Monitor report which sounded a loud alarm when it revealed something disturbing: at 225 percent of world GDP, the global debt of the nonfinancial sector, comprising the general government, households, and nonfinancial firms, is currently at an all-time high of $152 trillion.

There’s no consensus on what levels of debt-to-GDP should be considered alarming – we would guess that 225% qualifies – the IMF said. In addition, research has shown that high debt is linked with lower growth.  If companies postpone paying off debt, they could become “very sensitive to shocks, increasing the risk of an abrupt deleveraging process,” the IMF said.