Toxic Pool of Bad Loans Threatens World Economy...
Beneath the surface of the global financial system lurks a multitrillion-dollar problem that could sap the strength of large economies for years to come.
The problem is the giant, stagnant pool of loans that companies and people around the world are struggling to pay back. Bad debts have been a drag on economic activity ever since the financial crisis of 2008, but in recent months, the threat posed by an overhang of bad loans appears to be rising. China is the biggest source of worry. Some analysts estimate that China’s troubled credit could exceed $5 trillion, a staggering number that is equivalent to half the size of the country’s annual economic output.
But it’s not just China. Wherever governments and central banks unleashed aggressive stimulus policies in recent years, a toxic debt hangover has followed. In the United States, it took many months for mortgage defaults to fall after the most recent housing bust — and energy companies are struggling to pay off the cheap money that they borrowed to pile into the shale boom.
With China’s economy slipping, countries with significant exposure to raw materials, like Australia and Brazil, are facing serious headwinds. Germany exports machinery and automobiles to China, which had been a counterbalance to slow growth in Europe.
Click for interactive chart:
Change in the Shanghai composite index relative to the peak
http://www.nytimes.c...aps-charts.html
Edited by Rogerdodger, 03 February 2016 - 11:51 PM.