Why delay in global debt repayment is worrisome

Washington

WHILE everyone fixates on the US election, developments in the world economy threaten to create problems for the next US president and, possibly, trigger a major financial crisis. A little-noticed study by the International Monetary Fund (IMF) delivers the bad news. It finds that global debt - including the debts of governments, households and non-financial businesses - reached a record US$152 trillion in 2015, an amount much higher than before the 2008-09 financial crisis.

What's worrisome about this is that the global economic recovery has assumed widespread "deleveraging" - the repayment of debt by businesses and households. Initially, the theory went, these repayments would slow the economy. To reduce their debts, households would cut consumption and companies would cut investment. But once debts had receded to manageable levels, consumer and business spending would bounce back. The economy would accelerate.