Review on the Global Economic Situation and How It May Impact Tokenized Assets part 1 — Debt

In our previous post, we mentioned that major economies are facing a series of lingering or new-found difficulties:

“… a decade of #stagnation across the Eurozone despite record-setting bond purchases and negative interest rates, Japan in its third “#LostDecade”, and the United States rushing to raise interest rates to brace for the upcoming downturn towards the end of the soon-to-be longest economic expansion since the Great Depression…”

While it is always difficult to time the next #recession, any level-headed observer would see that after a decade of #expansion a #downturn is likely inching closer. In this context, it is interesting to look at some of the structural problems in the global economy and assess how, with consideration of these issues, would the next global economic downturn impact #tokenized assets.

First, an obvious problem that haunts many is #debt. Too many economies have seen debt level rise too fast for too long. #IMF has an overview with the latest data (https://blogs.imf.org/2019/01/02/new-data-on-global-debt/). It is easy to see that debt is plaguing most advanced economies and #China, all with significant levels of public as well as private debt. An interesting dynamic here has to do with interest rates: Simply put, due to the rapid growth of debt in recent years, when interest #rates are low, some debtors may find it difficult to service their debt if interest rates rise. Before central banks tighten monetary policies and raise interest rates, therefore, they have to take into account the effects on debt servicing.

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This post is originally published on our Medium channel.