The debt scale of major economies is too large, p4.

Key tip: From the current data, the major economies in the world are heavily burdened with debt. A large proportion of debt can easily evolve into an actual crisis against the backdrop of weak economic growth. This kind of crisis will increase the pressure on currency depreciation, and the devaluation of major currencies will eventually trigger chaos in the monetary system, a trend that deserves attention and monitoring. According to the current data, the major economies in the world are heavily burdened with debt, and a large proportion of debt can easily evolve into an actual crisis against the backdrop of weak economic growth. This kind of crisis will increase the pressure on currency depreciation, and the devaluation of major currencies will eventually trigger chaos in the monetary system, a trend that deserves attention and monitoring.

I. Large scale of sovereign liabilities

In 2009, Greece's fiscal deficit as a percentage of GDP rose to 12.7%, and government sovereign debt exceeded more than double its GDP, which triggered market concerns about Greece's debt crisis and also a chain reaction among a series of European countries such as Spain and Portugal. However, while the global focus is on the European debt crisis, the debt and deficit situation in the other two major economies, the United States and Japan, is also not optimistic.

For example, the U.S. deficit accounted for 10.6% of GDP in 2009, and sovereign debt accounted for about 100% of GDP, which is not much better than Greece. The situation in Japan is also not optimistic. Japan's tax revenue in the 2010 fiscal year was approximately 37 trillion yen, while public debt reached as high as 44 trillion yen, meaning the debt-to-budget ratio exceeded 50%. Overall, both domestic and foreign debts of the major economies in the world are at an overspending level, and the scale of government debt is massive.

II. Debt crisis隐患

According to the warning line of a 3% deficit-to-GDP ratio, the domestic debt of the current major economies is severely overspent, posing a significant debt risk.

However, liabilities can only evolve into a real crisis depending on market expectations and confidence trends. Whether domestically or internationally, the fundamental reason liabilities can be sustained comes from economic growth; continuous economic growth can sustain the market's confidence in the government's ability to repay debts. Once the economy falls into stagnation or weakness, and market expectations decrease, the government's credit is questioned, leading to a debt crisis. Essentially, Greece's current debt crisis belongs to this category.

On another front, governments maintaining excessive debt are essentially attempting to promote economic recovery and prosperity through increased money supply. Stable and prosperous economies help alleviate market confidence pressures, thereby resolving debt crises. But considering there is no sustainable model to maintain global economic growth, it’s unlikely that the economy will achieve a virtuous recovery in the medium and short term. With limited direct effects of loose policies and the long transition period of economic model transformation, market confidence is likely to remain at a low level for a long time. This means that debt crises triggered by insufficient market expectations may burst under the stimulation of some accidental events at any time, and Greece will obviously not be the last case. Such crises will continue to interfere with the economic recovery process, in turn increasing the possibility of crises.

Even under certain specific circumstances, a larger-scale global debt crisis might erupt.

III. High pressure on currency depreciation

Liabilities put pressure on currency depreciation in two aspects: one is the pressure on currency value due to liability risks. For example, the recent weakness of the euro was actually caused by concerns over regional debt risks triggered by Greece's debt crisis, resulting in pressure on the currency. The second aspect is that large amounts of debt and deficits often develop in tandem with increases in the money supply. Excessive money supply usually implies a decline in the actual purchasing power of the currency.

From this perspective, the direct effect of a debt crisis is currency depreciation, and the devaluation of major currencies will lead to instability in the global monetary system, making it easier to trigger risks.

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