why is extensive Word debt a risk for the world economy?
Extensive global debt poses several key risks for the world economy[1][2][3][4]:
Reduced capacity to withstand shocks: High-debt economies are more vulnerable to economic shocks and have less scope for counter-cyclical fiscal policy to support their economies during crises[3].
Impaired long-term growth: Excessive debt can undermine long-term economic performance by crowding out private investment, increasing uncertainty, and leading to higher future distortionary taxation[2][3].
Spillover effects and financial contagion: Debt crises in one country can spread economic pain to other countries through tightening of financial conditions, slowdown in trade, and loss of confidence[1][4].
Debt servicing burden: High debt levels force governments to devote more resources to interest payments rather than productive investments in areas like health, education, and infrastructure[5].
Increased risk of sovereign defaults: Unsustainable debt burdens raise the risk of sovereign defaults, which can have devastating effects on domestic economies and the broader global financial system[1][4].
In summary, the extensive global debt burden poses significant macroeconomic risks, including reduced resilience, impaired long-term growth, financial contagion, and the potential for disruptive sovereign debt crises[1][2][3][4][5].
Zitate: [1] Constantinos Herodotou: The global debt trap – the implications for ... https://www.bis.org/review/r230302d.htm [2] How Does Excessive Debt Hurt an Economy? https://carnegieendowment.org/chinafinancialmarkets/86397 [3] [PDF] Economic consequences of high public debt: evidence from three ... https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp2450~e008f3b9ae.en.pdf [4] How a Country's Debt Crisis Can Affect Economies Around the World https://www.investopedia.com/ask/answers/051215/how-can-countrys-debt-crisis-affect-economies-around-world.asp [5] A world of debt | UNCTAD https://unctad.org/publication/world-of-debt