The world is in historical debt

The April 2018 International Monetary Fund Fiscal Monitor reported global debt has reached a historically high level. In 2016, debt peaked at 225 percent of global gross domestic product (GDP) (the value of all goods and services produced across the world). Public debt is a significant component of global debt. The IMF wrote:

“For advanced economies, debt-to-GDP ratios have plateaued since 2012 above 105 percent of GDP — levels not seen since World War II — and are expected to fall only marginally over the medium term ... In emerging market and middle-income economies, debt-to-GDP ratios in 2017 reached almost 50 percent — a level seen only during the 1980s’ debt crisis — and are expected to continue on an upward trend.”

There are numerous reasons high levels of government debt (the amount a government owes) and significant deficits (the difference between how much a government takes in and how much it spends) are a cause for concern:

Higher interest payments. Governments typically finance debt by issuing government bonds. When bonds mature, the government issues new debt. If interest rates have risen, the cost of that debt increases. As a result, high debt levels can make tax hikes and spending cuts a necessity, explained the Committee for a Responsible Federal Budget.

Lower national savings and income. You may have heard the phrase, “Robbing Peter to pay Paul,” which means taking money from one source to pay another. When a country runs a deficit, a similar thing happens. In The Long-Run Effects of Federal Budget Deficits on National Saving and Private Domestic Investment, the Congressional Budget Office explained, “A dollar’s increase in the federal deficit results in a 33 cent decline in domestic investment.”

The tax lag. In his book “Do Deficits Matter?” Daniel Shaviro suggests sustained deficit spending creates a “tax lag” by shifting responsibility for current spending onto future generations.

ARE YOU AN INSECT GOURMET?

Throughout history, people have eaten bugs. According to National Geographic, hunter-gatherers probably learned which insects were edible by watching birds. People’s appetite for bugs didn’t disappear as they became more civilized. Pliny, a Roman scholar, wrote beetle larvae fed a diet of flour and wine were a favorite snack of aristocratic Romans.

The tradition of eating insects continues today.

According to National Geographic, “Gourmands in Japan savor aquatic fly larvae sautéed in sugar and soy sauce. De-winged dragonflies boiled in coconut milk with ginger and garlic are a delicacy in Bali. Grubs are savored in New Guinea and aboriginal Australia.

Reuters said in Germany, Netherlands, and Belgium, shoppers can buy burgers made of buffalo worms (the larvae of buffalo beetles) at the local grocery. It’s a visually pleasing product, according to one of the burger company’s founders.

In North Carolina, diners can order a tarantula burger, described as “a hamburger topped with a crunchy full-grown, oven-roasted tarantula.” It comes with a side of fries — and possibly a drink to wash it down as fast as possible.

This article was provided by Peterson Wealth Management. For information, call 775-423-8007, or visit PetersonWM.com.