A GLOBAL financial paradox has confounded economists - debt is soaring but interest rates have tumbled to record lows in recent months.

The figures are mind-boggling. According to the Bank for International Settlements (BIS), total global credit to the non-financial sector (notably governments, businesses and households) has soared in the past five years by US$28 trillion to a record US$184 trillion. Indeed, the figure is even higher as the BIS - the central banks' central bank - monitors only 40 nations. Such has been the growth of credit in emerging market economies that their share has shot up to US$57 trillion - almost a third of the total. Across the 40 countries, the average debt-to-gross domestic product (GDP) is a whopping 238 per cent.

Economics textbooks need to be rewritten, as an increase in the demand for debt has in the past led to a rise in interest rates. Despite the recent debt surge, however, interest rates have collapsed by such an extent that in recent weeks, some US$17 trillion of government bonds (equivalent to a fifth of global GDP) were trading on negative yields. A buyer of a German or French bond, for example, would have been paying these governments for the privilege of holding their bonds. Other bond yields are positive but so low that at best they can be regarded as safe-haven investment shields against recession and political turmoil. The German economy, for example, is sliding into recession and both short- and long-term bonds are negative. In the UK, the 10-year government bond has a yield of only 0.5 per cent - investors are worried about Brexit.