US interest rate rise could trigger global debt crisis

The Telegraph ^ | 13 Sep 15 | Telegraph Staff

[SkyPilot]

Global debt levels are dangerously high and central banks cannot keep the game going indefinitely, warns the high priest of orthodoxy

Debt ratios have reached extreme levels across all major regions of the global economy, leaving the financial system acutely vulnerable to monetary tightening by the US Federal Reserve, the world's top financial watchdog has warned.

The Bank for International Settlements said the wild market ructions of recent weeks and capital outflows from China are warning signs that the massive build-up in credit is coming back to haunt, compounded by worries that policymakers may be struggling to control events.

"We are not seeing isolated tremors, but the release of pressure that has gradually accumulated over the years along major fault lines," said Claudio Borio, the bank's chief economist.

The Swiss-based BIS said total debt ratios are now significantly higher than they were at the peak of the last credit cycle in 2007, just before the onset of global financial crisis.

"We are not seeing isolated tremors, but the release of pressure that has gradually accumulated over the years along major fault lines."

_{Claudio Borio, head of BIS economic department}

Combined public and private debt has jumped by 36 percentage points since then to 265pc of GDP in the the developed economies

[SkyPilot]

Get ready.

[ßuddaßudd]

Everything,, is America's fault . .

[Opinionated Blowhard]

What, you mean we just can’t keep calling the bank and telling them to raise our limit so we can spend like there’s no tomorrow????

[ken5050]

And when rates go up..so dos the cost to finance our nearly $29 trillion in debt..

[dangus]

>> Global debt levels are dangerously high and central banks cannot keep the game going indefinitely <<

While this is true, the culprit is government. Personal debt is down 18%. Raising interest rates will cause a recession, which will send government deficits through the roof. But it will prevent workers from demanding higher wages... which is the ultimate goal of the fed: shift the burden of paying for employees from corporations to welfare programs for the working poor.

[RayChuang88]

If the Fed could raise the interest rate 12.5 basis points instead of the 25 points, they’d do it. Otherwise, I think due to the unstable Chinese economy, the Fed may hold off raising the interest rate until December 2015.

[Sam Gamgee]

I’ll eat my foot if the US raises rates anytime in the next 18 months. Not going to happen.

[SkyPilot]

And when rates go up..so dos the cost to finance our nearly $29 trillion in debt..

Yes it does, and that spells major trouble for the Federal budget.

The % needed to fund the debt would take over everything, from Defense to Medicare to every other category. Oh, Social Security as well. Sorry for the folks who really think that is "off budget" in an economic crisis.

[SkyPilot]

I’ll eat my foot if the US raises rates anytime in the next 18 months. Not going to happen.

I don't know Sam. They may or they may not.

Five things to know about the Fed raising interest rates (14 Sep 15)

"Since 2008, the Federal Reserve has kept the federal-funds rate — the banks' overnight borrowing rate — near zero. Now more confident about prospects for growth and inflation, policy makers are preparing to raise those short-term rates — perhaps at the conclusion of their two-day meeting on Thursday or later this year."

4 factors shaping the Federal Reserve's tough decision on interest rates

Wall Street definitely does not think they will, that is why the Dow is only down 80 points today.

But if they do.....hold onto your hat.

[CPT Clay]

.25 per cent that has been telegraphed for months, will not do much.

[Drago]

Tough beans...long past time for the Fed Funds rate to be “normalized” in the 3-6% range.