Global debt SOARS to 250 TRILLION amid fears for ECONOMIC CRISIS | World | News

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The dramatic $25 trillion increase has rattled an international financial system already struggling to deal with rising US interest rates, widening spreads for borrowers and a strengthening US dollar.

And fears of a debt crisis will hit emerging markets over the coming months with investors turning their backs on currencies and bonds in countries such as Argentina, Turkey, Brazil and South Africa.

Joseph LaVorgna, chief Americas economist at analysts Natixis, said investors would be particularly concerned by corporate debt.

He warned: “The corporate sector is highly leveraged and could be very vulnerable to higher interest rates.

“Firms have used artificially low rates to borrow in the capital markets and only buy back stock in the equity market.

“The inherent instability of debt over equity financing suggests that the next downturn could hit investment spending unusually hard.”

Market volatility and likely inflation sparked by the trade war between the US and China could have an adverse effect on assets but experts said markets had been surprisingly resilient.

Mike Thompson, president at S&P’s Investment Advisory Service, said: “The eclectic and somewhat volatile style and the way this stuff comes up — we’re talking about $200 billion of a $17 trillion dollar trade, it’s more meaningful than in the past.

“But markets have done a good job of becoming more and more desensitised at the trade rhetoric.

“The market will dip and then come back.

“You can’t be too short-term with this, because if you reacted to everything you’d really as an investor blow yourself up.

“A lot of this is the market trying to figure out what’s really going on here.”

Other high-profile figures have issued stark warnings about the global debt load.

The IMF’s first deputy managing director, David Lipton, said high debt and low interest rates posed the greatest market risks.



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