There rightfully has been a lot of attention on the staggering unemployment numbers caused by the coronavirus in recent weeks, but in the near future, it might have nothing on the figures for another looming problem related to the pandemic.
With businesses shut down and jobs being lost around the globe, a worldwide consumer credit default crisis is on the horizon, according to Bloomberg.
In a report last month, the Institute of International Finance said households around the world will have $12 trillion more debt than during the run-up to the financial crisis in 2008.
The IIF released a report in January that estimated that total global debt reached an all-time high of close to $253 trillion in third quarter of 2019.
In China, where the coronavirus pandemic began, overall credit-card debt rose almost 50% from this time last year and delinquency ration rose from 13% at the end of 2019 to 20% in February, according to the Bloomberg article.
Household debt-to-GDP ratios in countries such as France, Switzerland, New Zealand and Nigeria are at an all-time high, while lenders in both Australia and U.S. are flooded with requests for financial assistance.
Last year, credit card balances were at a reported $930 billion in the U.S.
Defaults will likely skyrocket in poorer and developing countries, according to Capital Economics.
That is why the World Bank and the IMF have called for an immediate suspension of debt payments from the International Development Association — which offers loans and grants to the world’s poorest developing countries — according to Axios.
But how will that assistance, and stimulus packages such as the $2.2 trillion one passed by the U.S. government, alleviate any future default problems?
Mortgage lenders and banks are trying to toe the line with being compassionate by offering payment relief to customers, but also mindful that they need to stay in business.
Many Americans often bemoan the roughly $23 trillion debt the country is in, which likely will go up soon in the wake of the pandemic.
But given what has already taken place in China and the dire financial situation other nations are in, people in the U.S. are likely to find out how bad of a problem defaults and debts are worldwide, not just at home.