debt
Image: © CreditRepairExpert / Steven Millstein via Flickr

You know that big financial crisis we just had? Prepare for round two.

The IMF says there’s too much debt in the world economy and another crisis is super likely.

What it means: The International Monetary Fund (IMF) is an organisation whose job is help out countries who have money troubles by giving them advice and lending them cash. It has just announced that it’s worried that we’re all about to have a repeat of the 2008 financial crash, mainly because we didn’t bother to fix the problems from last time.

One of the things the IMF is concerned about is global debt, which is currently £139 trillion. That’s higher than it has ever been before, and 60 percent bigger than it was in 2008. Debt is a really tricky subject for economists. Plenty think it can be a good thing if it allows companies and people to invest in things now that will have big payoffs later. A business that borrows money to build a new factory might then be able to make more stuff, earn more money and hire more staff, for example.

But debt also needs to be paid back, and sometimes borrowers don’t have the money to do so. This becomes even more of a problem because you almost always have to pay interest on your debt (interest is a percentage of the loan that you pay back on top of the amount you borrowed). Interest rates incentivize people with money to lend it to people without. But it also makes unpaid debts grow bigger and bigger, which makes them more and more difficult to pay back.

The IMF is worried that lots of companies and people that have borrowed money in the last decade won’t have the funds when it comes to repayment. That’s partly because the IMF thinks global economic growth (basically, the world getting richer by making more stuff) is slowing down. Lots of economists think lower economic growth will also mean lower wages for individuals and lower profits for companies, meaning less money with which to pay back their huge debts.

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Reader Comments

  • WhereAreTheVikings

    What a terrible, terrible shame. Western Civilization nurtured capitalism, and now capitalism is destroying it. And these young people seem to welcome the invasion of their homeland. The media and schools have been very efficient in wiping out all traces of blood and soil.

    • prollawalllynotahumanoid

      Capitalism isn’t the problem. It’s corrupt politicians taking bribes and kickbacks from Globalists and the Chinese.

      • WhereAreTheVikings

        Maybe I should have said crony capitalism. Although Italians importing Chinese to make “Italian leather” shoes is not crony capitalism. It is capitalism, pure and simple.

        • prollawalllynotahumanoid

          That would be crony capitalism and globalism combined. They aren’t concerned with the affect their policies have upon their citizens, the health and welfare of their society and culture or their economy. What it isn’t is fair-free trade to further national interests.

          • WhereAreTheVikings

            I’ve always seen them as one and the same, but perhaps they need to be named individually, just to bring home the point.

      • WhereAreTheVikings

        But now that travel is so easy and borders are virtually down through H1bs and the like, theoretically you can’t blame capitalists for the pursuit of cheaper labor, although I do heartily blame them not being more patriotic than that. Perhaps the emerging nationalism will force them to voluntarily do what they should have morally been doing all along, and that is employing business practices that preserve their countries and nationalities. The government should be doing everything it can to encourage that, to the extent that small government should do anything but guard the borders and strictly, drastically, limit immigration.

      • Henry Lam

        It is China with its corrupted mindset affecting the world.

        • prollawalllynotahumanoid

          No it is not. Capitalism is the fairest and least corrupt system of all.

          Socialism and communism is based on authoritarianism, coercion and police intimidation. It has and always will be rife with criminality, bribes and kickbacks.

          Corruption can be anywhere but it is the very basis of socialism and communism.

    • Henry Lam

      The government is too weak. They do not understand the mindset of communists and how they educate their people. Those communist people are only loyal to their country and could be dangerous. The immigration law should only accept those who accepted multiculturalism and taught from a democratic education system. This virus events clearly has shown how stupid to take China as a friend.

      • WhereAreTheVikings

        The government is not too weak. Just weak-minded about some things.

  • Gabi Rodrigues

    For how many days can a country maximum close their borders to foreigners maximum? Like now, with the virus, everyone is using 30 days. Can it be more?