Global debts rise $57tn since crash
After the explosion of borrowing in the boom years that led to the great crash and recession of 2007-08, most governments - especially those of rich developed countries - said they would embark on policies that would lead to greater saving, debt reduction and what's known as deleveraging.
They implied they would encourage prudence, so that the sum of household, business and government debt would fall.
So what has actually happened to global debt?
According to a new study by the influential consultancy McKinsey Global Institute, global debt has grown by $57tn or 17 percentage points of GDP or worldwide income since 2007, to stand at $199tn, equivalent to 286% of GDP.
And the single biggest contributor to the rise and rise of global indebtedness is that government debts have increased by $25tn over these seven years.
What is striking is that of 47 big economies, only five - Israel, Egypt, Romania, Saudi Arabia and Argentina - have actually succeeded in reducing their debts.
But a further five have seen massive increments in their indebtedness: the debts of China have risen by 83 percentage points, Portugal's by 100 percentage points, Greece's by 103 percentage points, Singapore's by 129 percentage points and Ireland's by 172 percentage points.
And before we move on, you can see from these trends why it would be politically so inconvenient (ahem) for the eurozone to let Greece off its debts - since Portugal and Ireland, among others, would be bound to demand some of the same forgiveness.
So what has happened to the UK's indebtedness? Well, McKinsey says it's increased by 30 percentage points, to 252% of GDP (excluding financial sector or City debts) - as government debts have jumped by 50 percentage points of GDP, while corporate and household debts have decreased by 12 and 8 percentage points of GDP respectively.
Or to put it more succinctly, the UK's indebtedness has increased as public sector borrowing has more than offset private sector saving, and in overall terms is relatively high: only 12 big developed or developing countries have bigger debts than Britain's, but things could be considerably worse.
Now readers of this column won't be surprised that arguably the most important national story of rising indebtedness is that of China: including financial sector borrowing, its indebtedness since 2007 has almost quadrupled, from $7.4tn to $28.2tn, or from 158% of GDP to 282% of GDP (nb the increment here is different from the one for China above, because of the inclusion of financial sector debt).
So in a few short years, and largely as a result of an explosion in liabilities relating to property developments, local authority investment in infrastructure and "shadow banking" (or the activities of opaque institutions that mimic banks), China has gone from being one of the least indebted economies to one of the more indebted.
It is more indebted than Australia, the US and Germany, which is surprising given that it is still seen as a developing country and they tend to have lower debts.
The big concern is that a big chunk of the massive amounts lent in China at a staggeringly fast pace will never be repaid - because, for example, property developers and speculators will go bust.
McKinsey argues that China's central government does have the financial capacity to cope with a fully fledged financial crisis. It calculates that even if half of property related loans defaulted and lost four-fifths of their value, any financial rescue would see government debt rising to around 79% of GDP - which would be roughly equivalent to the UK's current public-sector indebtedness.
But for the avoidance of doubt, a crash of that magnitude would still be something of an economic disaster, since growth in China would almost certainly vanish - and the country could find itself in a Japanese-style downward spiral of households and businesses deferring expenditure to the extent that economic stagnation would become a way of life.
Perhaps, however, the most chilling part of McKinsey's analysis relates to how difficult it will be for a number of rich countries to reduce high levels of government debt.
It singles out Spain, Japan, Portugal, France, Italy and the UK as all needing to shrink their public sector deficits by around 2% of GDP if they are to have any chance of reducing their indebtedness. But as McKinsey says, if these governments were to make the necessary cuts or tax increases, that could turn out to be self-defeating, by impairing economic growth.
McKinsey adds that the real rate of GDP growth in these countries would need to double from current forecast, for debt-to-GDP ratios to start falling in Spain, Japan, Portugal, France, Italy and Finland.
But recent forecasts have revised down projected growth rates for the global economy - implying that these economies will not be able to rely on economic recovery to help them ease the burden of debt.
That means, McKinsey says, that useful reductions in public sector indebtedness may require sales of assets (privatisations), higher or one-off wealth taxes, a more permissive approach to inflation (since debt becomes more affordable when nominal incomes rise) and "more efficient programmes of debt restructuring".
And if that sounds a bit familiar, it is the sort of thing that the new government of debt-depressed Greece has been saying.
But as Greece's flamboyant finance minister Yanis Varoufakis opined the other day, in times of economic stagnation, arch-capitalists and the radical left are united in their desire to do almost anything to ease the depressing impact of excessive debts.