Complex Made Simple

Bitcoin is dwarfed by fiat money, but cash-based global debt breaking records

Cryptocurrencies like Bitcoin are making a lot of noise and some investors very rich, but not even a dent in global economies.

The global debt is skyrocketing, and of all nations, tiny Lebanon has the 3rd highest debt to GDP ratio in the world.

Relative to Gross Domestic Product (GDP), global debt exceeded 318% in Q1, 2018, according to a report by the Institute of International Finance (IIF) Tuesday.

Bitcoin is no savior either.

A crisis has been brewing and AMEinfo is again warning that it will shake the foundations of what we thought were sturdy financial foundations following the 2008 international economic crisis.

Read: Global debt bomb ticking: GCC on the brink of a complete economic meltdown

Just a tiny Bit’coin’

Bitcoin and cryptocurrency still have a lot of room to grow in terms of their impact on global financial markets and their representation as currency.

“Bitcoin dominance is scant compared to fiat dominance,” reported the Daily Hodl, a news site for the digital economy.

Fiat currencies and traditional derivatives do dwarf Bitcoin, Ethereum, Monero, Bitcoin Cash, Litecoin and all other digital assets.

The following graphics from Visual Capitalist illustrate the full scope of world debt, and how tiny the cryptocurrency market is.


The size of Cryptos prevents them from mass disrupting global economies or fueling massive money laundering and criminal activities, like their fiat counterpart.

Accumulated government debt estimated by the International Monetary Fund has roughly reached $63 trillion, the result of an imperfect system with fiat, which cannot be solved today with Bitcoin or any other digital currency, but maybe in the future when it may prove more capable of managing money than the central banking system.

How do Saudi women, UAE crypto, help relieve debt crisis in Bahrain?

Global Debt Topped $247 Trillion in the First Quarter

Bloomberg revealed that the financial sector indebtedness rose to record $60.6 trillion, while global debt rose to a record $247 trillion in the first quarter, more than $29 trillion higher than the end of 2016, quoting an analysis by IIF.

Global debt is up almost $150 trillion over 15 years and had climbed by 42% in the fourth quarter from a decade earlier, said the IIF.

Sonja Gibbs, IIF’s senior director of the global capital markets department, noted that there was an increased risk of sovereign debt crises in a select few developed markets as a result of the increase of debt and financing costs.

The pace of the debt increase in the first quarter is a concern to the IIF as they note that the quality of the debt has declined, particularly in emerging markets.

Total emerging market debt rose by $2.5 trillion to a new record of $58.5 trillion in Q1.

Read: Left your debt in Dubai? Your free get out of jail card is here

Government debt has risen most sharply in Brazil, Saudi Arabia, Nigeria, and Argentina, according to the report.

About $900 billion is in US dollar-dominated emerging bonds/syndicated loans that will mature by 2020.

The IIF said the debts of non-financial corporations in emerging markets (Ems) rose $1.5tn in the first quarter to $31.5tn, the equivalent of 94.4% of GDP, a higher level than in developed markets where they were equal to 89.4% of GDP, as the Financial Times (FT) reported.

“The emerging market bond market has grown tremendously over the past decade but trading volumes have not kept pace,” said Sonja Gibbs, senior director at the IIF. “When you combine a rising rate environment, stronger dollar and low levels of liquidity, you have a recipe for volatility and the exacerbation of any periods of market strain.”

The World Bank said that with 55% of the world’s population living in cities, more attention must be paid to jobs and social protection for the urban poor; “as the population is rising faster than “the ability of cities to absorb these people in terms of infrastructure and employment.”

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