Global Debt Is Booming. Debt Alarm In Developed Countries Is Ringing Again.

The Trump Administration recently announced a massive tax reform plan to reduce corporate and personal income taxes and promote the principle of "territorial taxation".

This can be seen as maintaining the United States in the next few years.

A "tonic", but its side effects should not be underestimated. It will not only push the United States towards unsustainable high wealth and high debt, but also become a potential promoter of the global debt crisis.

According to the CRFD, the US think tank estimates that Trump's tax reform will cut taxes by 5 trillion and 500 billion dollars in the next 10 years.

At present, the US federal government debt scale has increased to about 19 trillion and 900 billion US dollars, and every American citizen, from the born baby to the old man, has a national debt of over US $60 thousand.

If the new tax reform plan is implemented, the proportion of US federal government debt GDP will rise to 111% from the historical high of 77% now by 2027.

It is estimated that US federal debt will account for 180% of GDP in 2035, and the entire financial system is at risk.

The US Treasury Secretary, Mr Mou chin, explained that the Trump administration would offset the financial pressure of tax cuts by promoting economic growth, reducing tax deductions and making up for tax loopholes.

The path he gave is a series of economies.

It will boost economic growth by more than 3%, bringing trillions of dollars in revenue to the US government, thereby reducing the proportion of US debt to GDP.

However, the IMF released the world economic outlook report last month, predicting that the US economy will grow by 2.3% and 2.5% respectively this year and next. The inter party Congressional Budget Office estimates that the average annual growth rate of the US economy in the next 10 years is only 1.9%. In order to achieve the goal of reducing the deficit and government debt, the US economic growth rate needs to be maintained at around 4.5%.

Looking at the world, many economies are experiencing similar or better than the United States.

What's more worrying is that in addition to public sector debt, the global private sector and ordinary families are also heavily indebted.

According to the statistics released by the International Finance Association, the total debt of families, governments and companies increased by more than 70 trillion dollars over the past 10 years, reaching a record $215 trillion in 2016, equivalent to 325% of global GDP.

Data also show that by the end of 2016, the total debt of emerging market countries was US $55 trillion, equivalent to 215% of its total GDP.

Simply speaking, the rapid expansion of global debt stems mostly from the international financial crisis which broke out in 2008. Under the stimulation of loose and loose monetary policy, families, enterprises and governments have devoted themselves to this huge monetary feast in low interest environment.

But the feast of money will end.

At present, the Fed has stepped into the interest rate cycle and hinted that the scale of its balance sheet will begin to reduce within the year.

The rising cost of financing and the increased risk of debt default have shown signs in the market.

Debt alarm in developed countries is ringing again.

According to the International Monetary Fund, the level of public debt in five European countries, the United States and Japan has broken through the warning line. The sovereign debt crisis of developed economies has become one of the immediate risks of the global economy and is likely to become a fuse for a new round of global financial crisis or economic recession.

What is more alarming is that emerging market economies will have $1 trillion and 100 billion of bonds and loans mature this year, and the dollar denominated debt will account for 1/5 of the total debt.

The International Finance Association warns that the overall debt burden of emerging markets is increasing as global interest rates begin to rise.

It is estimated that many emerging economies, like Greece, will be unable to withstand the three blow up of fiscal tightening, credit crunch and consumption contraction.

In short, since the outbreak of the international financial crisis in 2008, global policymakers will face another big test.

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