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The global debt is reportedly 318% larger than the value of all the world’s economies. The Institute of International Finance (IIF) estimates that the human race owes $247 trillion. One major issue concerning this fact is that very often debt leads to war.
The GDP is the value of all the economic activity in a nation. This means the world’s debt apparently exceeds global economic activity by 318%.
To add to the fear, the world’s debts increased by $8 trillion during the first three months of 2018. To make matters worse, the rate at which the world is accruing debt increased in 2018.
“The pace is indeed a cause for concern,” Executive Managing Director Hung Tran told Yahoo Finance. “The problem with the pace and speed is if you borrow or if you lend very quickly … the quality of the credit tends to suffer.”
Low-quality credit means higher interest rates, which will increase the size of the debt. Therefore, the more the world borrows, the more it owes.
“The quality of creditworthiness has declined sharply,” Tran observed.
If Tran is right, some governments might find themselves unable to borrow money. That can lead to economic chaos and political collapse.
There Is Little That America Can Do
Frighteningly, there is little that America can do about the global debt crisis. The gross domestic product (GDP) of the United States was $19.39 trillion in 2017.
Everybody should be frightened because the United States is the world’s largest economy. The second largest economy, the People’s Republic of China, had a GDP of $10.43 trillion in 2017.
Obviously, there is not enough money on Earth to pay the world’s debts. The most likely outcome of the debt crisis is a widespread default.
A default means that governments will collapse and money will become worthless. An inevitable outcome of a default is hyperinflation.
America’s Debt Has Exceeded $20 Trillion
America is leading the way in the global debt crisis. In fact, the national debt of the United States exceeds the value of America’s GDP.
The U.S. national debt reached $20.7 trillion in February 2017. However, America’s GDP was $19.39 trillion at the end of 2017.
Like the rest of the world, America does not have enough money to pay its debts. The United States is on the fast track to default.
Debt Leads To War
To make matters worse, history teaches that debt leads to war. Furthermore, both World War One and World War Two were partially caused by debt.
During World War One, the British Empire probably racked up a debt of $142 billion. They owed most of that money to the United States.
The United States likely entered World War One in 1917 to ensure British victory. The fear was that Britain would not pay its debts if the Central Powers (Germany, Austria-Hungary, and Turkey) won.
A partial cause of World War Two was the efforts to make defeated Germany pay for World War One. The Allies aggressively tried to make Germany pay $33 billion it did not have in reparations.
Debt Created Hitler
Moreover, the reparations issue helped Hitler and the Nazis come to power. Germans were convinced they needed a strong leader and a powerful military to protect their economy from reparations.
Hitler was a forceful leader, whose first priority was rebuilding the German war machine. Once they rebuilt the war machine, the Nazis used it to punish the countries demanding reparations.
Things were made worse by American efforts to get the Allies (France, Italy, and the British Empire) to pay their war debts. The “war-debt” issue deeply divided America and Europe.
Disgust at unpaid debts was one reason why many Americans refused to join the war until Pearl Harbor. Consequently, this delay probably enabled the Nazis to conquer France in 1940.
The global debt crisis should frighten us all because debt leads to war.
You may also enjoy reading an additional Off The Grid News article: Enormous National Debt Will Double Again In 10 Years Or Less
Do you have any additional thoughts on the world’s gigantic debt problem? Let us know in the comments below.