How long can world live in debt?
Living in debt - is the natural state of the world economy, and it is acceptable for both creditors and debtors, economists said in an interview with Vestnik Kavkaza, commenting on Alexei Kudrin's warning about the fact that world's largest debtors must think about ways to return the debts.
He said today at the Moscow Financial Forum that the current situation with the debts in several countries is critical. "Today there is are a big discussion about how countries will repay their debts. Europe is also approaching a critical point, the United States have already reached it. This is a serious challenge," RIA Novosti quoted him as saying.
Chairman of the Board of the National Currency Association, Dmitry Piskulov, agreed that many economists are sounding the alarm due to excessively high level of debts of developed countries compared to the GDP level, however, he also drew attention to the fact that debt can be raised indefinitely if there is confidence in the currency and its issuer.
"The national debt of developed countries is not growing too fast, and payments are not a problem for the United States or the Eurozone, since they are issuers of the currency that can be issued in the required amounts. Actually, that's what happens when the US Central Bank provides additional funding to pay off the national debt at the request of the Congress. Indeed, there is a debt crisis in less developed countries of Europe, associated with low economic growth and lack of sufficient budget revenues, but it is still not a critical problem," he explained.
If we talk about corporate and bank debts, they are usually refinanced by the Central Banks. "Such problems are constantly resolved, so Kudrin's statement is rather rhetorical. It just urges developed countries and their corporations to think whether they can afford to increase debts even more," he noted.
Chief economist of ‘PF Capital’ Evgeny Nadorshin stressed that ultra-high debts of the world's largest countries are no catastrophe. "The United States have a simple scenario - continue to maintain the debt, just like before, and when the situation is favorable, during the budget surplus, for example, they will repay it. Considering low credit rates, that are currently observed in developed and developing markets, large debts are not an unsolvable problem," he said.
Overall, world's economy can function without repayment of such debts indefinitely long. "The world's economy has existed in the conditions of huge debts for a long time, modern companies are also working with debt financing for a long time - it is a normal situation. It happens for years and decades, even for centuries, in some cases," he concluded.