Global Debt Now Exceeds $100 Trillion [AUDIO]
According to the Switzerland-based Bank for International Settlements, global debt now exceeds $100 trillion.
In an article published on Monday, March 10 on Bloomberg.com, the amount of debt globally has soared more than 40 percent to $100 trillion since the 2008 recession, as governments borrowed to pull their economies out of recession, and companies took advantage of record low interest rates.
Financial adviser for S.G. Long and Company in Missoula, Bob Seidenschwarz, the extraordinary amount of new debt was in reaction to the financial crisis of 2008.
"The challenge we face now," Seidenschwarz says, "is whether or not we can count on both the private and public sectors to make the right decision to whittle away at this liability, which we owe to ourselves and to others as we trade globally."
Seidenschwarz said the major challenge will come if, and when, major world economies begin to falter.
"The question is, what happens if economic expansion starts to contract for whatever reason," Seidenschwatz said. "If that happens, then the liability in terms of the compounding effect on this debt begins to grow exponentially. That's one of my biggest concerns, are we making the right estimates of how we're going to be able to pay this back? If we're wrong, that has major implications in the way of inflation and much higher interest rates which would be very detrimental to anyone that owes debt, particularly the kind of debt we're describing here."
Seidenschwarz said the effect of the global debt trickle right down to Missoula, with so many dependent on their investments to prepare for retirement.
In addition, he said the world is beginning to see the effect of not having their fiscal house in order, with the situation in the Ukraine.
"Europe right now gets the majority of its natural gas from Russia," he said."Look at the leverage that Russia now has over Europe. It's not a good bargaining position to be in when they supply your heating fuel. The same principle goes here in the U.S. whether it's over debt or natural resources, you want to be in the strongest possible position both fiscally and economically, because that's what allows you to make decisions, rather than having someone else make them for you."
S.G. Long Financial Adviser Bob Seidenschwarz