Global Debt: Challenges and Opportunities

Merrill Lynch

Emmanuel Hatzakis, Christopher Wolfe

Research

16 Pages

Merrill Lynch examines the global debt surge and why decades of borrowing may be suppressing growth instead of supporting it. The paper argues debt can become embedded in modern economies while warning that deleveraging cycles have triggered instability, weaker demand, and tradeoffs.

Key Takeaways

Debt Expansion Risks: Global debt reached $204 trillion by 2015, rising 50% since 2007 and climbing to 294% of global GDP.
China Credit Boom: China’s debt quadrupled after 2007, reaching 290% of GDP by 2015 as government stimulus fueled property and investment borrowing.
Deleveraging Can Work: Sweden and Finland grew exports nearly 10% annually during 1990s deleveraging after recapitalizing banks, restructuring bad loans, and implementing fiscal reforms.
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