Economists are increasingly sounding the alarm by making pessimistic forecasts. According to Laffer Tengler Investments President Arthur Laffer, the world is on the verge of a debt crisis that will span over the next ten years and is unlikely to end well.
The expert warns that the world will be caught in a debt trap. Moreover, this distress could be fatal for some countries.
“I predict that the next 10 years will be the Decade of Debt. Debt globally is coming to a head. It will not end well,” the head of the investment consulting firm noted. He recalled that in September 2023, global debt edged up to a record $307.4 trillion. Since 2013, global borrowings have soared by $100 trillion.
As a share of global gross domestic product, global debt has surged to 336%. To meet debt payments, hundreds of countries will have to cut their social spending, including on health care and education, the International Monetary Fund estimates.
At the same time, some countries will be able to improve their fiscal situation if they attract highly skilled workers and investment from abroad. However, less fortunate nations will lose revenue and labor force. Laffer believes that some emerging economies may collapse, while some developed countries failing to address their debt problems are doomed to "slow fiscal death."
Currently, advanced markets such as the US, UK, Japan, and France account for more than 80% of the debt amassed mainly in 2023. As for emerging markets, the swelling debt burden is seen in China, India, and Brazil. "There are two main ways to cover this issue: raise taxes or grow your economy faster than debt is piling up," the head of Laffer Tengler suggests.
Earlier, Nassim Taleb, economist and author of the bestselling book "The Black Swan," warned of a "death spiral" that the United States would face if budget deficits and debt continued to rise. According to the expert, the lack of money in the American treasury is swelling to such an extent that it would take a "miracle" to bail it out.
