The ingredients of a fresh global economic crisis are assembling, and the IMF and the World Bank are failing to acknowledge their role in creating them.
Larry Elliott, The Guardian’s economics editor, writes:
According to the IMF, global debt has risen to a record level of $152tn (£1223tn) – more than double world GDP – at a time when activity is sluggish. Collapsing commodity prices and weak demand from the west has meant growth in sub-Saharan Africa is running at half the level of population growth. Companies in the emerging world loaded up on debt during the commodity boom and are now vulnerable to rising US interest rates and any softening of the global economy. China is the most egregious example of debt being used to boost activity artificially.[But] The argument that rising debt is fine because on the other side of ledger is an asset increasing in value is specious. The only reason the assets are rising in price is because investors are taking on more debt to buy them. At some point, the asset bubble bursts leaving the borrowers in severe problem. This was the lesson of the sub-prime crisis and it is remarkable that memories are so short.