Yes I mean trillions and yes I’m talking about debt. I know that I’m a broken record on the topic of debt but I want everyone to understand that there is a better way. The stress and anxiety that debt creates isn’t necessary. God can free you from these chains if your willing to change your behavior. I know it is hard and I know it is counter cultural. But what a witness it can be for our faith in Jesus. Showing those around us that God has provided another way for you and your family. That your reliance is not on earthly things or institutions but it is solely on God.
For which of you, desiring to build a tower, doesn’t first sit down and count the cost, to see if he has enough to complete it? Luke 14:28 (WEB)
Tangent complete…now onto the story at hand. Global debt hit an astonishing figure at the end of the third quarter of 2017. You already know the amount because it is in the title of the post, $233 trillion. Let’s first step back and think about that figure. Can anyone really fathom how much money that is? If you went to your bank and asked for that amount of money in $20 bills, how big would the pile cash actually be? It is an incredible figure that simply boggles the mind. It is an inconceivable amount of money.
Now for more figures, according to the Institute of International Finance, this is an increase of 8% since the end of 2016. That is a massive increase in a very short period of time. I guess if your going to drive the train off the cliff you might as well do it in a spectacular fashion.
It’s also easy to know why this number has ballooned so quickly, record low interest rates. For example, in the late 1990’s global debt sat at $70 trillion. That is a lot of money but is far short of current day figure of $233 trillion. The gasoline on the fire, as the analogy goes, was record low interest rates for a record amount of time. Rates have been near 0 or even negative all over the world for nearly a decade now.
I also like how the Institute of International Finance found a silver lining in all of this. It noted that the percent of debt to GDP has now declined for four straight quarters. First off, who cares. The amount we owe is still going up. Get back to me when the total amount of global debt actually starts to drop. I’ll be impressed at that point in time. Until then however, I’m going to keep writing these blog posts.
Also, interest rates are finally starting to creep up. I imagine that has something to do with above mentioned decrease. The US kicked rate hikes into high gear in 2017 and other countries such as Canada and the UK are hiking rates as well. There is also talk out of China and Japan about slowing or even halting their purchases of bonds that have helped to keep rates low in their countries. There are plenty more examples just like this but at the end of the day, we all knew that rates would have to go up. Cheap money would stop flowing freely at some point.
The biggest issue, in my opinion, facing nations across the world is, can everyone afford higher rates? If your loans carried variable rates or if your out of control spending has forced a continued dependence on debt (I’m looking at you governments), your going to get squeezed. That squeeze is going to place a significant strain on economies all over the world. We will only know the full impact of this squeeze in hindsight. However, if your debt free you won’t have to worry about this stuff at all. In fact, you will celebrate higher rate because you actually have money that will be earning those higher rates. It is a beautiful thing and way better than debt.