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Debt Is Having A Diminishing Impact On GDP Growth


I have been working as a financial analyst for 13 years and I like to talk about macro-economics.

There are several indicators that are pointing to high inflation in the coming years.

Needless to say, that assets like gold, silver will be beneficiaries. Cryptocurrencies are not likely to be far behind.

I would like to keep it short and simple (KISS). The chart below from IMF will explain my point.

Debt and Output Growth

Between 2010 and 2019, the global debt as a percentage of GDP has surged. As a matter of fact, global debt as a percentage of GDP was 331% in July 2020.

During the same period, output growth has declined.

It implies that debt is having a smaller impact on output growth.

It also implies that printing money is not always the solution to global growth challenges.

If debt is growing and output growth is declining, where is the debt going?

The answer is simple – Debt is money in the modern financial system and money is being used to speculate in various asset classes.

Further, since easy money is available globally, inflation will be rampant in the coming years.

Economists talk about the zero hour. When additional debt has no impact on GDP growth. The only consequence of additional debt is inflation.

I will not be surprised if zero-hour come in the next decade.

Invest in gold. Invest in silver. Invest in cryptocurrencies. Invest in yourself.

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faisalhk786
faisalhk786

I am a financial analyst with interest in global financial markets and macro economy. I write for various publications providing short-term and long-term investment ideas among different asset classes.


Portfolio Diversification Strategy
Portfolio Diversification Strategy

For every investor, its important to have diversified portfolio strategy. One of the most important reasons to go for portfolio diversification is to reduce the risk. Another critical reason to pursue portfolio diversification is to generate returns from different asset classes that beat the rate of inflation. This will ensure that purchasing power is preserved for an individual. At the same time, when a portfolio has risky assets like equities or commodity, it ensures that returns can be maximized.

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