Market update: MARCH 2017

The $US200 trillion global debt mountain – how big a threat is it really and what are the implications for investors?

 Introduction

 Excessive debt tends to be at the centre of most scare stories regarding the investment outlook – whether they relate to China, public debt in developed countries, corporate debt in the US or Australian household debt. The standard debt related scare story runs something along the lines of “we have lived beyond our means. Any attempt to prevent a debt implosion won’t work or will just delay the inevitable. Divine retribution will get us in the end!” One big debt scare that gets wheeled out is that total global debt outstanding has reached a new record high of nearly $US200 trillion and either that on its own or in combination with any significant rise in global interest rates will trigger the next crisis. To be sure problems with debt or a desire to reduce it are part and parcel of most financial crises and economic downturns. And total global debt has indeed reached record levels. But that’s not the same as saying another financial crisis is imminent. This note looks at the main issues.