A second major global report in two months foresees current record-high debt worldwide leading to another economic meltdown tragedy, but worse than in 2007-2008.
That’s the view from an international panel of senior academic and finance-industry economists. Their late September study, referred to as The Geneva Report, was released this week. It has been commissioned and published by the International Centre for Monetary and Banking Studies.
Peculiar Progressive discussed an earlier report with a similar warning from the Bank of International Settlements earlier this year. That column is here.
The Geneva Report, early within its 125 pages, stated:
Contrary to widely held beliefs, the world has not yet begun to delever [from 2008’s crisis] and the global debt-to-GDP [gross domestic product] is still growing, breaking new highs…At the same time, in a poisonous combination, world growth and inflation are also lower than previously expected, also – though not only – as a legacy of the past crisis…Moreover, the global capacity to take on debt has been reduced through the combination of slower expansion in real output and lower inflation.
The report argues that developed economies like the U.S. and Europe have “been on a declining path since the 1980s”. But it added that “output growth has been slowing since 2008 also in emerging markets, most prominently China.”
The bottom line: all the world’s economies, except perhaps for Germany, are in trouble. Economists have been citing problems with the world’s central banks pushing interest rates lower and lower, hoping it would spur borrowing, investment, and job growth. At the same time, the central banks have been devaluing their currencies by printing more and more of them. The process has seemed to work for the big banks, but not for the citizenry, leading to growing personal debt and a dissolution of the middle class.
Economist and investor Jim Rickards, author of “Currency Wars” and “The Death of Money”, has said that, in the U.S., the result has been this: the Federal Reserve has basically been printing money and giving it to Wall Street. The low interest rates have shortchanged savers, who can’t make any money on their savings. He said last year that the result was a transfer of $500 billion in wealth from savers to the big banks.
Other officials, like Sheila Bair, former chair of the Federal Deposit Insurance Commission, have argued this: the Obama administration should prosecute Wall Street executives who caused the 2008 crisis through bundling toxic securities and nontransparent derivative sales, and throw them in jail. But Obama would prefer to settle on large monetary fines, costing bank shareholders, but leaving the Wall Street wolves free and their banks to keep profits.
As Peculiar Progressive has reported through this year, that policy has allowed Wall Street to continue its parasitic practices. We’ve shown that in columns, here and here.
Worldwide, the European Union, the International Monetary Fund, and the Millionaire Congress in the U.S. have pushed toward austerity. Peculiar Progressive has shown how austerity has led to tragedies ranging from deaths to poverty in a column here.
What can you as a citizen do about all this? In America, you’ve a November election coming up. Get organized, get educated as to your candidates and their economic stances, and get active in electing someone who will do something to truly help America. More specifically, public executives and legislators who will make derivatives transparent, bring back the federal Glass-Steagall Act, and realistically begin to reduce Americans’ $1 trillion credit card debt, over $1 trillion college-loan debt, a national debt of $12.5 trillion (held by the public), and fixing our national infrastructure needs of $2.3 trillion.