Rapport om den globale gældskrise: Deleveraging? What Deleveraging? , udarbejdet af ICMB International Center
For Monetary and Banking Studies
After the bankruptcy of Lehman Brothers, the world entered the worst financial crisis since the Great Depression of the 1930s. The crisis affected mainly developed economies: in some cases, in particular the US and the Eurozone, output had already started to contract one year earlier (see the dating by, respectively, the NBER and CEPR). However, after Lehman, the crisis deepened and spread worldwide. The output contraction in the US ended in the third quarter of 2009 but the recovery has been weak. In the Eurozone the situation has been worse, with a double dip in 2011 that seems to have ended only recently. Emerging markets did better during the crisis, but have recently slowed down. Both the length and depth of the crisis, as well as the weak recovery, cannot be understood without an analysis of the role of debt dynamics. This is the aim of this report. We provide a multi-dimensional perspective on leverage for both advanced and emerging economies. Our comprehensive approach includes both public and private debt, with the latter broken down along sectoral lines (households, non-financial corporates, financial sector). Moreover, we take into account national adding-up constraints by relating sectoral debt levels to the overall international investment position. We examine debt dynamics during the pre-crisis period in developed economies and the subsequent phase of adjustment attempts in recent years. In addition, we highlight a new wave of debt accumulation in emerging markets that has occurred since 2009. In this analysis, we emphasise the macroeconomic impact of leverage, with a sharp distinction between ‘normal’ recessions, however deep, and the long-lasting impact on the level of output and output growth that can be generated by excessive leverage and financial crises.
Accordingly, the report provides a deep dive into the details of global debt dynamics over the past decade, with consistent comparisons across regions and sectors and an emphasis on the interaction of debt and income. In 2009, half of the economies of the world were in recession and about three quarters of global GDP was in economies that were contracting. The progress of repair since then has been decidedly uneven, importantly related to policy choices. Also, some nations that avoided the direct effects of the financial meltdown have recently built up excesses that raise the odds of a home-grown crisis. Contrary to widely held beliefs, the world has not yet begun to delever and the global debt-to-GDP is still growing, breaking new highs
(see, for example, Figure 2 Deleveraging, What Deleveraging? 1.1). At the same time, in a poisonous combination, world growth and inflation are also lower than previously expected, also – though not only – as a legacy of the past crisis. Deleveraging and slower nominal growth are in many cases interacting in a vicious loop, with the latter making the deleveraging process harder and the former exacerbating the economic slowdown. Moreover, the global capacity to take on debt has been reduced through the combination of slower expansion in real output and lower inflation.
