According to the World Economic Forum (WEF) this planet needs another £63 trillion ($103 trillion) in credit in order to underpin growth over the next ten years.
This would double current credit levels.
But as everyone knows, to have a creditor you need a debtor. So who are these new debtors going to be? Anyone looking around the globe at the present can easily see that we can't handle the current levels of debt.
The WEF report 'More Credit with Fewer Crises: Responsibly Meeting the World's Growing Demand for Credit' developed in collaboration with McKinsey & Company says that meeting this credit demand will be challenging and that financial protectionism may put the brakes on cross-border financing.
The report defined four criteria for sustainable credit:
'Limited “hotspots”, or areas of excess credit where repayment and servicing prospects are at risk.
Transparent and manageable contagion risk in order to reduce system volatility.
Limited 'coldspots', or segments where growth is inhibited by a lack of access to credit.
Alignment with social goals, to ensure that both economic and welfare needs are met.'
So they've come up with a whole new box of tools to monitor them.
'Leaders in the private and public sectors must take decisive actions to avoid contributing to credit hotspots and coldspots, while still meeting the US$ 100 trillion of credit demanded to sustain economic growth over the next 10 years,' said GianCarlo Bruno, Director, Financial Services Industries, World Economic Forum.
The report gives banking a 'critical role' in supporting future economic growth and concludes with eight recommendations for policy makers, regulators and financial institutions:
1. Integrate the concepts of sustainable credit into the regulatory agenda.
2. Create standardized government accounting practices to increase transparency and accurately assess sovereign finances.
3. Encourage responsible borrowing through financial education.
4. Encourage financing of local “coldspots” through targeted mechanisms.
5. Task a single agency with monitoring global credit levels and system-wide credit sustainability.
6.Â Align banks' risk appetite with sustainable credit criteria.
7. Drive innovation by financial institutions, developing new mechanisms that can safely meet future global credit needs.
8. Establish goals for efficient and deep capital markets by 2020 in developing economies.
Please take great note of point 5 – 'Task a single agency … '.
This report seems to be another huge experiment of putting global politics above the markets with the cost of $103 trillion debt attached. Debt that we and our descendants ad infinitum will be enslaved to for evermore. This needs stopping, but by who and how?