The World Economic Forum president had to go back more than two centuries to find a similar time when the world had accumulated enormous debt.
Information about international debt during the early 1800s, when the Napoleonic Wars occurred, is more elusive. However, to shed light on the situation, it has been estimated that by 1815, the British government had accrued debt exceeding 200% of GDP.
Borge Brende expressed concern on Sunday at a World Economic Forum meeting in Saudi Arabia that global debt is quickly becoming equal to global economic production.
The International Monetary Fund reported last year that by the end of 2022, the world’s public debt had reached $91 trillion, or 92% of GDP. Although debt levels were lower than during the epidemic, they were still in line with a rising trend that had persisted for decades.
Additionally, Brende said that countries should use fiscal policies to lower their debt levels without causing a recession.
He said that global growth is currently at 3.2% per year, which isn’t terrible but is also lower than the 4% trend the globe has seen for decades.
According to Brende, it might lead to a situation similar to the 1970s, when development remained stagnant for ten years. However, this scenario can be prevented if the globe refrains from starting any additional trade conflicts and keeps trading.
Amid mounting concern about the abundance of red ink in recent years, particularly from leading nations such as China and the United States, the World Economic Forum has issued a debt warning. U.S. bond yields measure borrowing costs in international markets, and increasing debt might raise them.
According to the Congressional Budget Office, military spending will fall short of debt servicing expenditures in 2024.
Also, in March, the CBO predicted that the U.S. public debt, now at 99% of GDP or $34 trillion, would skyrocket to $141.1 trillion, or 166% of GDP, by 2054.
Several prominent Wall Street figures, including Larry Fink of BlackRock, Ken Griffin of Citadel, and Jamie Dimon of JPMorgan Chase, have raised concerns about the situation.
