The stock of global debt, the size of the banks, the risks of another financial crash are all bigger than in 2008

In election Britain this last week has been consumed with business and finance, mainly the hedge funds, lambasting Labour for being ‘anti-business’, as though massive indulgence in tax avoidance and continued insistence on de-regulation of finance were the conditional requirements of a successful global economy.   Actually they are the forerunners of the next financial collapse which may be sooner than many people anticipate.   Consider the evidence.   The world is awash with much more debt than before the epic financial crash of 2008-9.   In 2000 the global stock of debt outstanding (at constant 2013 exchange rates) was $87 trillions.   By the end of 2007, just before the crash it had risen to £142 trillions, and by 2014 to $199 trillions.   This represents a 40% increase in world debt in just 7 years, which is staggering both in terms of the size of the debt pile and the rate of its build-up.   It need hardly be said that this is extremely risky, especially when proposed reforms of the banking sector are very meagre and not set to come into effect till 2019.

It is worrying too that debt mountains are growing fast in almost all the world’s biggest economies.   Since 2007 the debt-to-GDP ratio has accelerate by 72% in Spain, 68% in Sweden, 66% in France, 64% in Japan, 62% in the Netherlands, and 55% in Italy – even leaving on one side the outliers like Ireland where it has grown by 172%, Greece by 103%, and Portugal by 100%.   Perhaps most concerning of all, China’s debt quadrupled in this short 7-year period to 282% of GDP, a higher ratio than the US or slightly lower if the financial sector is excluded.

Not only that, but all the biggest banks, including the Big 4 in the UK, are now substantially bigger than in 2008-9 when they were judged to be ‘too big to fail’ and therefore had to be bailed out at colossal taxpayer expense which nevertheless paved the way for the longest, most anaemic recovery since the second world war.   The only banking reform measures contemplated in the UK are the ‘bailing-in’ of failing banks, though the mechanics proposed are widely expected to be ineffective, and the Vickers Commission’s proposals for setting up ‘Chinese walls’ between banks’ retail and investment arms, which City lawyers and accountants will make hay with through regulatory arbitrage.

To cap it all, Osborne’s only hope of maintaining the recovery is by prompting a further big increase in household borrowing, precisely the wrong basis for securing sustainable growth.   It is already at a level in excess of £2 trillions, and still heading north.   Once interest rates eventually rise from their 6-year next-to-zero level, the rate rise which the City is craving for will cut a huge swathe through the livelihood of half the population already decimated by years of prolonged austerity.   Both globally and nationally this is the old order in its death throes.

6 thoughts on “The stock of global debt, the size of the banks, the risks of another financial crash are all bigger than in 2008

  1. Oh micheal the banksters are still at it no one’s doing nothing about them haven’t these fraudsters done enough damage its not rocket science you see you jail somdone for pinching food has they had sanctions against them but let ghe biggest shieshters to get away with it strangely the show must go on yet carney another failed banksters brought over from canada with Osborne who running of the country taking it further down the road of it being rjn sorely by American company isnt it strange labour hasnt fought back against tbis but allowing the fraud to carry on is a crime but will you has a party realuse its the ninty nine percent who aint rich pay your wages not the rich has poor havent lost nowt but their jobs and wages to the crooked government who take the backhanders from companies who are awarded big contracts it wasnt long ago this was called fraud treason taking out the back end of but you all become crooks can we atleast see honest politicians whose goal is to look after us jeff3

  2. I posted a long, (perhaps overlong,) comment with links, here yesterday arguing that the Banksters; as |Jeffry Davis likes to call them, (people like David Miliband and Andrew Balls, Ed Balls’s whizzkid younger brother who just has received a huge City bonus of about £4.5 million,) are simply the tip of a very unpleasant iceberg and a symptom of a culture of corruption, cronyism and nepotism that now extends well beyond the financial sector into almost every profession and into every walk of life and which became entrenched, endemic and ever more pernicious under Blair.

    It is still awaiting moderation. I am therefore taking the liberty of resubmitting it below:

  3. The fish rots from the head down as French like to say:

    Public services, (including the NHS,) urgently need to cleaned up just as much as the banking sector, (your favorite bette noir here,) the aparantly endemic and well documented, frequently criminal, abuses committed by AVANTA, G4S, A4E, et al have been done to death here, without any useful or positive outcome for either their, clients (victims, including our disabled, old and our unemployed,) or the tax payer.

    This seems completely typical:

    As does this:

    Rachel Reeves; Reeves a former professional lobbyist, is married to Nicholas Joicey, director of the international department of HM Treasury. and a former private secretary and speech writer to Gordon Brown. Reeves’ younger sister, Ellie, is a member of Labour’s National Executive Committee and Joint Policy Committee, and is married to John Cryer, another Labour MP.

    The failures of Labor the safely, adequately and professionally discharge their responsibilities in towns like Rochdale, Rotherham and in Mid Staffs, (an undisputed culture of abuse and neglect there, contributing to the premature and frequently humiliating deaths of perhaps as many as 1200 elderly and vulnerable patients,) and perhaps 1400 vulnerable and at risk young women being sexually exploited and preyed upon, on their watch in Rotherham, (and other less well publicized examples that came to light after Rochdale, in Sheffield, Oldham and elsewhere.)

    Then this:

    “The communities secretary, Eric Pickles, is to take over the administration of Tower Hamlets council, in east London, for two years after an inquiry commissioned by his department found evidence of a crony culture in which grants and properties were handed to favored groups, and proper procedures were ignored.”

    Then this:

    Simply throwing more money at these people won’t do anything useful not without root and branch reform that includes clear public accountability, transparency and a more criminal convictions.

    But faced with things like this and the cuts to policing, with budget and policy being determined typically by unsavory characters like Shaun Wright, before becoming the PCC; (one ballot box contained just 5 votes.) Wright was a councilor on Rotherham Council. He was in charge of children’s services for five years from 2005; he also sat on the Police Authority of South Yorkshire Police.

    This more than anything else is the real Blair legacy and is the real rot, (corruption, cronyism, nepotism and every form of graft at every level that is undermining this country and our key public services.

  4. My instinct is that it will probably not see the light of day.

    Labor not really being huge fans of honest criticism or free speech, (even less so than the other Tories whom they now so closely resemble in every respect,)

    We live increasing in an intellectually deficient word of abstract nouns; poverty, terrorism, banking, criminality and so on, whilst the real, specific and frequently despicable individuals who are actually personally responsible for particular appalling acts within these categories remain largely anonymous, and are generally completely divorced from all personal consequence, even the mild opprobrium of public censure.

    Whilst you bang on about,

    “The stock of global debt, the size of the banks, the risks of another financial crash are all bigger than in 2008….”

    Back in Rotherham, in Mid Staffs, in Rochdale and elsewhere thousands of , “ordinary,” people have to continue to live with real and concrete consequences of Labor’s failures.

  5. So, some people/organisations are “lambasting Labour for being anti-business” – mainly because Labour wants them to pay the correct amount of corporation tax! No matter that the Tories have agreed to a referendum which may lead to us leaving the EU? Now that WOULD be detrimental to business!! So, from where I’m sitting, it’s the Tories who are likely to do the most damage to business.

    “Osborne’s only hope of maintaining the recovery is by prompting a further big increase in household borrowing, precisely the wrong basis for securing sustainable growth.” So, if Labour wins the election, could they do something different? You’ve told us that in 2008 Alistair Darling introduced expansionary budgets to stimulate the economy, so hopefully this would still be an option.

    “World debt has increased by 40% in only 7 years.”
    This all sounds very depressing. However, if banks do indeed create money out of nothing to then lend to people/ companies/ countries who then go deep into debt, then couldn’t someone just “wave a magic wand” and make it all go away!? Wouldn’t that be nice!

  6. We owe nowt its the banksters still doing the fraudulent trading isnt life strange when the peasants pay with their lives paying for the crimes of others strangly they walk around freely the ninty nine percent who aint rich dont owe this money now that isnt strange but get to have that austerity while the one percent dont strange na its called norman law one for them another for us jeff3

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