Mountains of Debt: Reduce for a Better Tomorrow

“Debt is the vital air of modern commerce.”

 - Daniel Webster

These words were spoken in 19^th century when the U.S. bond market was still in its initial stage. But, today, in 21^st century, the situation has changed. The volume of debt is growing in multifold.  This is justified by the following fact:

The borrowings of global households, governments, companies and financial firms have risen from 246% of GDP in 2000 to 286% today.

But the question is that why is the world growing so much addicted to debt? The answer to this question lies in following two causes:

1. Interest on debt is a tax deductible expense.
2. People over-estimate the safety of the fixed payments that debt offers

3 global trends have magnified the effects of these causes. They are:

• Big exporters such as China have built up reserves that must be invested abroad
• The increasing inequality between the rich and poor
• The growth of finance industry where the impulse is to manufacture debts owed by others in order to generate fees

The need of the hour is to bring reforms in order to reduce these mountains of debt.

To know more, please read the following article at the Economist:

http://www.economist.com/blogs/economist-explains/2015/05/economist-explains-20?fsrc=scn/tw_ec/why_the_world_is_addicted_to_debt