The 2020 recession, which many countries are still going through, now has an “official” name: the Great Lockdown. In economic terms, the public sector’s response in practically all countries has been very swift and bold (which is not necessarily a good thing).1 This has caused the global public debt to skyrocket as never before. As a result, now more than ever, it is necessary to emphasize the dangers of public debt.
Article by Daniel Fernández Méndez from Mises.
In this article, we will highlight the contrasts between this recession and the previous one (the Great Recession of 2007) to analyze the public-debt problem the world is facing. In a second article, we will analyze the economic dangers of excessive public debt.
The Public Sector Entered This Recession in a Much Weaker Position Than in 2007
During the economic expansion that ended in 2020, the public sector in most countries was almost totally complacent about deficit spending. Levels of public debt shot up practically everywhere. So public debt in the Great Lockdown was considerably greater than in the Great Recession in all of the major regions of the world.
Chart 1: Public Debt by Region
Source: Prepared by the author with data from the International Monetary Fund. Created with Datawrapper.
Of the seven major world economies (G7), only Germany bore less public debt at the beginning of 2020 than it did at the beginning of 2007.
Chart 2: Public Debt of G7 Countries
Source: Prepared by the author with data from the International Monetary Fund. Created with Datawrapper.
The Debt Resulting from This Recession Is Unparalleled
The public sector has responded to the Great Lockdown recession with a fiscal expansion unparalleled in history. In 2009, the year with the largest fiscal deficit during the previous recession, global public debt increased by 10.5 percent of GDP. In 2020, global public debt increased by 18.7 percent of GDP.2 Across all regions we can see a huge contrast between the current recession and the Great Recession. Even countries in Latin America, which ran only moderate deficits in the previous recession, have significantly increased their debt as a response to the Great Lockdown of 2020.
Chart 3: Increase in Public Debt during the Great Recession versus the Great Lockdown (2009 versus 2020)
Source: Prepared by the author with data from the International Monetary Fund. Created with Datawrapper.
Advanced economies accumulated 50 percent more debt in 2020 than in the ten previous years combined, an unprecedented figure in peacetime.
The Twenty-First Century Is the Century of Public Debt (and Potential Default)
The amount of public debt accumulated since the beginning of the twenty-first century would have left the most insightful commentators of a century ago at a loss for words. However, the wealth and income attained this century would have also left even the most optimistic of our great-great-grandparents speechless. Accordingly, while it might seem that public debt is growing uncontrollably, since wealth is also growing exponentially one could conclude that the debt does not pose a problem because we are generating the resources with which to pay down the debt. However, in most parts of the world, public debt has grown faster than the economy. Only in emerging markets is the economy growing more rapidly than public debt is.
Chart 4: GDP Growth and Increase in Debt (2001–20)
Source: Prepared by the author with data from the International Monetary Fund. Debt and GDP in 2001 dollars were used to calculate the indices (as it is the most appropriate way to compare ability to pay).
In the most advanced economies, the public debt was 4.5 times larger in 2020 than 2001. It is expected to multiply sixfold through 2025.3 Meanwhile, GDP was only 1.9 times larger in 2020 than 2001, and it is expected to be 2.4 times larger in 2025 than 2001. The advanced economies are on a trajectory of public-debt accumulation that is unsustainable in the medium term.
The good news is that emerging economies, as well as sub-Saharan Africa, the Middle East, and ASEAN-5,4 are increasing their debt at rates significantly lower than their economic growth rates. Unfortunately, advanced economies’ enormous accumulation of debt has not been offset by the reduction in debt (relative to the size of the economy) in emerging markets.5
Debt accumulation was already unsustainable prior to 2020, but the Great Lockdown has triggered an explosive increase. It may soon be reaching a point of no return for the world’s major economies.
Originally published by by Market Trends at Universidad Francisco Marroquín.
- 1.A swift and decisive response to stop the spread of the virus while avoiding monetary and fiscal expansions would have been preferable.
- 2.See the IMF (2020).
- 3.International Monetary Fund estimates.
- 4.The last two regions are not included in chart 4.
- 5.In 2001, advanced economies made up 79 percent of global GDP, but in 2020, this figure fell to 59 percent.
‘The Purge’ by Big Tech targets conservatives, including us
Just when we thought the Covid-19 lockdowns were ending and our ability to stay afloat was improving, censorship reared its ugly head.
For the last few months, NOQ Report, Conservative Playbook, and the American Conservative Movement have appealed to our readers for assistance in staying afloat through Covid-19 lockdowns. The downturn in the economy has limited our ability to generate proper ad revenue just as our traffic was skyrocketing. We had our first sustained stretch of three months with over a million visitors in November, December, and January, but February saw a dip.
It wasn’t just the shortened month. We expected that. We also expected the continuation of dropping traffic from “woke” Big Tech companies like Google, Facebook, and Twitter, but it has actually been much worse than anticipated. Our Twitter account was banned. Both of our YouTube accounts were banned. Facebook “fact-checks” everything we post. Spotify canceled us. Medium canceled us. Apple canceled us. Why? Because we believe in the truth prevailing, and that means we will continue to discuss “taboo” topics.
The 2020 presidential election was stolen. You can’t say that on Big Tech platforms without risking cancellation, but we’d rather get cancelled for telling the truth rather than staying around to repeat mainstream media’s lies. They have been covering it up since before the election and they’ve convinced the vast majority of conservative news outlets that they will be harmed if they continue to discuss voter fraud. We refuse to back down. The truth is the truth.
The lies associated with Covid-19 are only slightly more prevalent than the suppression of valid scientific information that runs counter to the prescribed narrative. We should be allowed to ask questions about the vaccines, for example, as there is ample evidence for concern. One does not have to be an “anti-vaxxer” in order to want answers about vaccines that are still considered experimental and that have a track record in a short period of time of having side-effects, including death. One of our stories about the Johnson & Johnson “vaccine” causing blood clots was “fact-checked” and removed one day before the government hit the brakes on it. These questions and news items are not allowed on Big Tech which is just another reason we are getting canceled.
There are more topics that they refuse to allow. In turn, we refuse to stop discussing them. This is why we desperately need your help. The best way NOQ, CP, and ACM readers can help is to donate. Our Giving Fuel page makes it easy to donate one-time or monthly. Alternatively, you can donate through PayPal as well. We are pacing to be short by about $3700 per month in order to maintain operations.
The second way to help is to become a partner. We’ve strongly considered seeking angel investors in the past but because we were paying the bills, it didn’t seem necessary. Now, we’re struggling to pay the bills. We had 5,657,724 sessions on our website from November, 2020, through February, 2021. Our intention is to elevate that to higher levels this year by focusing on a strategy that relies on free speech rather than being beholden to progressive Big Tech companies.
During that four-month stretch, Twitter and Facebook accounted for about 20% of our traffic. We are actively working on operating as if that traffic is zero, replacing it with platforms that operate more freely such as Gab, Parler, and others. While we were never as dependent on Big Tech as most conservative sites, we’d like to be completely free from them. That doesn’t mean we will block them, but we refuse to be beholden to companies that absolutely despise us simply because of our political ideology.
We’re heading in the right direction and we believe we’re ready talk to patriotic investors who want to not only “get in on the action” but more importantly who want to help America hear the truth. Interested investors should contact me directly with the contact button above.
As the world spirals towards radical progressivism, the need for truthful journalism has never been greater. But in these times, we need as many conservative media voices as possible. Please help keep NOQ Report going.
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