“The size, speed and breadth of the latest debt wave should concern us all,” says World Bank President David Malpass.
International Finance Corporation and World Bank's country director Junaid Ahmad attend a press conference, at the World Bank Office, 70 Lodi Estate, in late October 2019 in New Delhi, India.Concerns about global debt emanating from the office of World Bank President David Malpass are drenched in pot-calling-the-kettle-black irony.
Better late than never, I guess. But Malpass isn’t wrong to highlight the $55 trillion of debt emerging markets from Asia to Latin America have churned out since the crisis that blew up Bear Stearns—and later Lehman Brothers. Worse, those are only the IOUs that have been booked officially as of the end of 2018. The tally excludes the last 12 months and whatever off-balance-sheet borrowing vehicles governments have been cooking up.
Now that he’s apparently among the converted, Malpass says the debt explosion of the last decade “underscores why debt management and transparency need to be top priorities for policymakers—so they can increase growth and investment and ensure that the debt they take on contributes to better development outcomes for the people.”
China and Japan, after all, are America’s top bankers, each holding more than $1 trillion of Treasury securities. All it would take to shake world markets is for President Xi Jinping’s government to curb dollar purchases. This makes for a unique risk dynamic between Asia’s smaller economies and the globe’s biggest.
None of this means 2020 will see a history-making debt crash. But the interplay between Trump and Xi raises the odds.
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