Why Hans-Werner Sinn expects inflation

S.States, companies, banks and households have been living on credit for years. But in the corona crisis, the world’s debts have soared, so that the World Bank Association Institute of International Finance (IIF) is comparing the development with a debt tsunami. At the end of the third quarter, the debt burden on the world economy was $ 272 trillion. That’s an increase of $ 15 trillion, or nearly 6 percent, since the start of the year. By the end of the year, the association expects a debt burden of 277 trillion dollars, which would correspond to 365 percent of the annual economic output, ie the “gross domestic product” of the world economy. At the end of 2019, this value was 320 percent.

In its latest analysis, the IIF does not only blame the pandemic and the associated aid measures by the states, which are estimated at 12 trillion dollars, for this development. Rather, the debt has skyrocketed since 2016. Since then, the debt burden has increased by $ 52 trillion, while the increase between 2012 and 2016 was significantly lower at $ 6 trillion. The Institute of International Finance rates such a rise in debt as in the past four years as unprecedented.


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