The mountain of debt of private companies is higher today than at the time of the financial crisis. It is a gigantic time-bomb of 19 trillion dollars, which is only defuse difficult, warns the International monetary Fund.
The building of the International monetary Fund in Washington
When the housing bubble burst in the United States more than ten years ago, and Lehman Brothers and other banks to crack into the abyss, the world stood in shock. The subsequent financial crisis, mitigate, lowered the major Central banks set their interest rates to zero level.
However, a return to normality and in order to a normal interest – is to materialize. It’s never been so cheap to borrow.
“The markets expect that a fifth of all the state will have bonds with negative yields – and at least the next three years,” said IMF financial market boss Tobias Adrian at the presentation of the report on global financial stability on Wednesday in Washington.
Massive Mountain Of Debt…
Because of the lucrative money and equipment are scarce, is invested a lot of money in corporate bonds. Investors risk were always joyful.
The IMF has studied for his report on the situation in eight major economies: USA, China, Japan, Germany, UK, France, Italy and Spain. Overall, the company debt add up in these countries to 51 trillion US dollars. These are the 51,000 billion dollars. This is significantly more than at the height of the financial crisis, as it was “only” a 34 trillion Dollar, Anna Ilyina, which has contributed to the IMF report.
The proportion of “risky loans” that may or may not be supported, was already high and growing fast. In some countries, he’ll already be 25 per cent, so Ilyina. So what happens when the world economic situation has deteriorated significantly?
… huge risks
To investigate this, have simulated the IMF experts, a crisis that is only half as strong as the financial crisis ten years ago. The result: “The debt of companies that could not Finance their loans from their income, would rise to 19 trillion dollars,” said Tobias Adrian. 19 trillion dollars, or roughly 40 percent of all corporate debt in the countries examined.
“This shows us that there are many weak companies outside the financial industry that can service their debts because interest rates are so low,” says Anna Ilyina.
Tobias Adrian is a Director for financial markets at the International monetary Fund
A disturbing scenario raises the question of how Central banks really are, when you are eventually faced with the question of whether to raise interest rates. But this is still music of the future. For the time being, the signs continue to point to low interest rates and bond-buying programs.
Problems with foreign debt
The IMF has identified additional problems: It looks dangerous vulnerabilities in financial services outside of traditional banks and regulation, and calls for authorities and politicians to take notice.
Risky the situation in developing and emerging countries. Here is a lot of money, that was due to the low interest rates in the United States and Europe in search of yield. The foreign debt in Emerging and developing countries is 60 percent higher than at the time of the financial crisis, said Adrian. The financing conditions change suddenly, would put many borrowers in payment difficulties.
The IMF, in its report, so the image of a financial system that by many weaknesses and risks that have plagued, which may also reinforce each other. “The vulnerability of the financial system acts as an amplifier for bad news,” said IMF financial market chef Adrian.
And bad news there are given the trade dispute between the US and China, and numerous trade barriers are already enough. So it’s no wonder that the IMF has called on the politicians to end this dispute finally. “We call on politicians around the world, to continue to work on a solution to the trade tensions,” said Adrian. “Because of the uncertainty and risk.”