Can The Global Debt Cause Another Financial Crisis?

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Global debt has reached new heights according to recent news reports. S&P is out with a new study arguing that the amount of global debt has increased by over 50% since the Great Recession. This number has created understandable worry among a large number of economically-minded individuals who are concerned about the global economy’s ability to handle massive quantities of debt. But there is also concern about what countries do with the debt that they accumulate. Using debt properly, as well as keeping it low, needs to be the main priority of developed nations around the world.

Debt and financial crises

The relationship between debt and financial crises is not direct. It is true that debt at certain levels cannot be sustained. Large interest payments lead to a considerable amount of stress on a country’s economy. Countries do not have the money that they need to pay for infrastructure or social programs. If countries are placed in a difficult position, they may not have the extra cash needed to pay creditors regularly.

There is the looming chance of a default like the one that harmed Greece during the Great Recession. It is possible that countries will have their credit rating downgraded as well. Countries with lower credit ratings will be unable to borrow as cheaply as before and their budgets will take a hit as a result.

Major Defaults

Major defaults could certainly cause a worldwide financial crisis. But at the same time, some countries can use small amounts of debt to do an extraordinary amount of good. Debt needs to increase in times of economic depression and hardship. Government debt can then be used to put people back to work and provide a general amount of economic stimulus.

Then, governments need to work hard to pay off at least a portion of that debt in times of economic prosperity. It is clear that much of the world is reaching that period now. International leaders need to be devising taxation and spending plans that can start to reduce the world’s debts and deficits before another recession occurs and they need to rise again.

What needs to happen

Countries have to gain control of their deficits during periods of sustained economic growth such as this one. They should raise taxes on their citizens and, if that is politically impossible, they should step up enforcement and eliminate as many loopholes as possible. Countries around the world are starving for revenue. They have hundreds of billions of dollars stored away in tax shelters that are completely immune from the influence of countries. There are many steps that the nations of the world can take the reduce the influence of these tax havens.

Currency Structure

In addition, countries need to look closely at their currency structures. Some currencies like the euro need to become more flexible in order to help smaller European countries pay off their massive deficits. Finally, countries have to be careful with their massive spending projects. They should primarily spend money in order to build up their own countries and the potential of their citizens. Debt should only be taken on to pay for the poor or to rebuild the roads and bridges that countries need to thrive.

Global debt may not be the catalyst to another financial crisis. There were almost seven decades without a major global recession and there is little indication that there will be another one anytime soon. But global debt can still become a major problem for the country and its economy. Global debt could mean the difference between a flourishing global economy and one that is constantly teetering on the brink of budget cuts and collapse.

How Demographics Will Be The Biggest Driver Of Financial Markets

The world where the financial markets are vastly used by professionals of older age is long gone. In the midst of the workforce getting younger almost daily, one can now witness anything from a retirement account to highly-complex investments being made by people in their twenties. Not to forget that it has been over 70 years since the first Baby Boomers came to the world. With that entire generation growing older, their input in the financial market is thinning and most principles of investing conservatism are slowly getting replaced with high-risk individuals who are not afraid to make unlikely purchases.

Age is an Important Factor

Throughout history, the trend of people who would achieve the level of financial freedom that enables them to make humongous investment used to be no less than 40. That is because the working industry was set up in a manner that requires someone to dedicate at least a decade and a half to collect enough promotions and bonuses to have any noticeable capital. Well, by analyzing the markets in the present, one can easily recognize countless popular individuals who achieved stardom through financial success while only in their twenties. This is something that did not happen with many generations in the 20th century as the world was battling innumerable issues that had to be prioritized. Just considering the fact that World War I, World War II, Cold War, and much more happened in the 1900s makes it perfectly logical that there was no time for young entrepreneurs to test their luck in the investing waters. Consequently, this reverse aging is making the financial markets more approachable. The long-lived stigmas and stereotypes of people who are deemed under the expected age to invest are no longer around. Meaning, one’s decisions and willingness to indulge their financial passions will be judged solely on merit, not on various external factors like age.

Globalization

One of the most important trends that are taking place is known as the globalization. The term covers everything from people migrating across the planet to economies spreading around different countries without interruption. For example, investors would seldom have opportunities to engage in trades with other countries during the 19th or even the 20th century. With so much international conflict and almost non-existent technology for personal use, reaching foreign industries was unimaginable. That has permanently been altered by the inventions that facilitated globalization. For example, someone looking to place their funds into an opportunity that appears successful does no longer have to worry about locations. Those thinking that companies doing IPOs in the United Kingdom will be profitable? They can easily buy stocks in those businesses through a few simple clicks. Such simplicity was not even deemed possible when people used to get their stock certificates mailed to them back in the 1900s. Luckily, the globalized world is opening financial markets to forever-changing demographics. This gives birth to a diversified body of investors from all over the globe.

Breaking the Glass Ceiling

Sadly, the history has imparted many glass ceilings on members of the protected groups. For instance, women were not exactly welcome to many men-operated industries in the past. This same concept applied to other demographics that were sabotaged by racially-motivated prejudices. In 2018, however, things like sexism and racism have been addressed through many political and social campaigns. Although there is a lot more room for improvement, reading about topics that cover female CEOs, per se, is no longer uncommon. This helps every industry evolve as the opportunities have been widened by ever-spreading concepts of open mind. Going back to the idea of people being evaluated based on merits, the fact that gender, race, or ethnicity are no longer used to quantify someone’s knowledge is certainly a great step forward.

Modernization

Having a statistical battle between Baby Boomers and Millennials who have a college degree is a fight that will be easily won by the Millennials. Thus, the knowledge-based demographics are also an important factor in the evolving industry of investing, trading, or leading successful entrepreneurship endeavors. People nowadays have to go through rigorous education that implies learning about things like taxes, advanced levels of math, and much more. This is not something that was available to older generations who used to run the financial markets for the past 50 years. As one glances on the upcoming century, it seems that the workforce with many tangible credentials will lead to a modernized and educated manner of operating.