What is Global debt and who owns it and who are we indebted to? This chart only highlights the debt figure. I have coined a new term 'Planetary Global Assets' that should be read in conjunction with the 'total Global debt.' If we want to study Global debt than I would suggest to read it in context of global worth of all the assets on Earth. At ten time global GDP of 71 trillion the asset base is conservatively around 710 trillion $. Though we 'earth folks' will not sell 'this unique asset' to an 'alien' for that value, even 10 times we shall refuse.
One cannot interpret debt without assets and the impact of corrosive inflation on liabilities, debt is a plummeting asset, on the other hand Global assets are increasing in real terms. Global GDP in 1960 was 1.6 trillion dollars; it rose in 1990 to 30 trillion dollars, and nearly doubled to $60 trillion in 2009 even after the crisis. Global GDP stands at 71 trillion (2012) and global debt at 50 trillion (2012) in these figures 20 trillion represents 'equity,' the Global debt / global GDP ratio is nearly 70%. Debt as a percentage of GDP is a good indicator as far as managing national budgets on an 'annual basis' is concerned, this is a good ratio if UN was the executive body running the world as one country. That is not the case it is very hypothetical economic idea. Definitely for a sovereign nation the debt to GDP ratio has to be maintained (Maastricht criterion) with some veneer of financial order.
Ninety percent of 'global debt' is owed to only 2% of the world population and sovereigns,the majority of the debt is owed to nearly 140 m people only, if the world goes bust the most impacted shall be those who own this debt. Debt is always a shrinking asset whereas 'assets' are far more valuable over time, assets historically unlike 'paper' inflate over time.
'Someone's savings is someone's else debt.' As Global 'Debt' mostly is the money of the world 'rich' nations and individuals, all excess 'profits' end up as savings within the global banking system,these savings are global bankers liabilities but onward lending of these savings by the banks with a leverage (protected by Basel lending adequacy ratios) means these debts are global banking assets.
Without these savings being on lent there will be no basis of capital formation, trade, finance or productivity. Without this debt, global economy will standstill, this debt help create projects and convert dreams in to realities.
Leverage and mortgage facilities provide savers an opportunity to step on to the ownership ladder, i.e. to buy a house today and improve the living standards better today and pay it over 30 years helps improvement of the quality of life, it is a natural hedge against inflation and an effective equity builder. Absence of this leverage in societies where such housing leverage is not available leads to shanty towns and slums. This is what capitalism is all about. World has its own safety valve, when irrational exuberance gets ahead of itself, the bubble bursts and the 'biggest victims' are the ones who own the 'debt.' This happens either through bouts of equity dilution or hyper inflation.(crisis of 2007-8 or German hyper inflation)
Global economy's growth has accelerated, it averages now at 3% annually nearly, world inflation average stands at 5% (2011) (developed countries 3% - developing countries 6.3%). Global GDP increases by 2.1 trillion due to 3% growth, in this low interest rate environment global inflation at 5% bites into future value of the paper assets i.e. global debt. In this low interest rate environment the headline inflation perimeters have been diluted by the central bankers. Interests have been maintained at lows to kick start stagnant global economy, in longer term the burden of global debt is eroding.
This chart does open 'hypothetical' avenue of discussion and that is the unused, hidden potential of 7 billion of humans in a global economy with our extended life spans human, true potential can only be abundantly utilized if further 'credit' is created to spark growth in weaker and poverty stricken areas of the world. Egalitarian development of 'lost intrinsic human potential' is the biggest missing link of lost opportunity for mankind.
Imagine the expansion of our productivity frontiers that our present world population of 7.1 billion offers with about 4 billion potential workforce with an average worker 'span of work' from age 20 to age 65 of 45 years. If we train and produce great skilled workers and universal opportunities, our global GDP will become a multiplier of the productivity of potential 4 billion people in work force for next 45 years. Banal internecine wars savagely waste our human potential. Fifty trillion of debt is a very minuscule portion of the total global assets, that is the reason world is so unequally divided between haves and have-nots. To unlock global potential global debt ceiling needs to be raised.