“There is simply too much debt in the world today.”

Jaime Caruana, General Manager, Bank for International Settlements

June 27, 2014

One year ago, when total global debt had reached its highest level in human history both in absolute terms ($199 trillion) and as percent of global output (286%), the Bank for International Settlements (BIS – the global economy’s central bank of central banks) concluded that “there is simply too much debt in the world today,” warning that the global economy is more vulnerable to collapse now than it was prior to the 2008 failure of Lehman Brothers.

Remarkably, the BIS had also warned as early as 2003 that the global debt of financial institutions and households was becoming “too much”, predicting that if not curbed it would lead to financial crisis. When BIS warnings went unheeded and the predicted crisis finally arrived in 2008, a complete meltdown of the global economy was barely avoided through massive new debt issuance when governments borrowed trillions to bail out private financial institutions.

The result has been that the original debt crisis of 2008 has grown to be a much greater menace to the world economy today. The size of the crisis has reduced the world’s private financial industry to an impotent dependent on government subsidies, as these taxpayer-funded subsidies to private financial institutions resulted in an explosion of government debt from $33 trillion in the beginning of 2008 to nearly $60 trillion today.

The world responded to the private debt crisis of 2008 with a tsunami of government indebtedness that has nearly doubled global sovereign debt, leaving governments enfeebled by over- indebtedness and weakened revenue raising capacity, unable to generate effective policies, and running out of time, money and legitimacy.

The colossal size of global debt makes today’s debt crisis a crisis of civilization. It is a crisis that can neither be understood nor addressed effectively without a comprehensive inquiry into the links between debt and civilization as these have unfolded from the dawn of history. Continue reading →