David, I feel that looming large and completely absent from the self-congratulatory stance of the Fed yesterday was the question of what to do with debt, private, public and corporate. We always talk about the USA because their economy is so large, and GDP consumer component has grown to 69%.. amazing, but this is probably true for the rest of the world.

I just read an article which gave (in my opinion) a clear view of the debt situation and what eventually to do about it.:

All this is far from new and Greece the 7th century BC was witnessing the same environment.

Go to Solon on Wikipedia and then scroll down to "Moral reform" to see their solving of the debt situation. 

I would be very appreciative if you could give your opinion on the potential of future destructive forces of the overall debt situation in the world today

Many thanks, and all the best,

David Fuller's view

Thanks for providing us with some interesting research, which persuades me that you know more about this subject than I do.  What I will add is that if governments hold most of their own debt, having gradually bought it back and/or often replaced it at advantageous times with very low interest rates, it is not too much of a problem.  For instance, I believe the Japanese government now holds over a third of all JGBs, and they can issue new bonds at extremely favourable rates, so it is not really a problem.  Similarly, former UK Chancellor George Osborne redeemed War Loan and some other even earlier debt at historically low interest rates.  

Many corporations have done the same.  However, there will be some less financially sound firms which have issued bonds at very favourable rates in recent years.  They may have problems if/when a normalisation of interest rates occurs.  Similarly, household borrowers will also be under pressure as interest rates rise and we can expect an increase in defaults.