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The World Is Addicted To Debt

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THE world is addicted to debt. The borrowings of governments, households, companies and financial firms have risen in almost every big country around the world since the year 2000, relative to their GDP. As economies develop they naturally build a bigger stock of financial assets, including debt. But plenty of countries have gone out on a limb. Some are financial centres, such as Singapore and Ireland. Their debts are inflated because they host the subsidiaries of many global banks and companies.

A an interesting interactive chart at the link.


Ending the debt addiction A senseless subsidy Most Western economies sweeten the cost of borrowing. That is a bad idea

THE field for the title of world’s worst economic distortion is a crowded one. Fuel subsidies in the emerging world are one contender; the implicit government guarantee that props up big banks another. But it is a less noticed and more pervasive warping of the economic fabric that is the most damaging. Despite the fact that the world is mired in debt, governments make borrowing costs tax-deductible, cheapening debt and encouraging borrowers to pile on more.

Tax breaks for debt come in two principal forms. Interest payments on mortgages are tax-deductible for personal tax purposes in at least some way in America and over a dozen European countries, including Belgium, Italy, the Netherlands, Spain, Switzerland and most Nordic states. And across the world firms can deduct interest payments to debt-holders from their taxable earnings. In contrast the dividend payments and retained profits that flow to shareholders are taxed in most places.

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