global governments have a long and
ignoble history of not paying back the
money that they borrow and yet the
market for lending to them has never
been bigger here to explain why is the
FTS economics writer and the author of a
book on the politics of debt
Martin Sandburg Martin thank you very
much for joining us so the first chart
that we've got shows just how much
governments have borrowed and it shows
how steadily the amounts have increased
over time why are they borrowing so much
it is enormous isn't it this is getting
up to probably the size of the whole
global economy how much the global
economy produces in a year government's
borrow for good reasons and bad reasons
a good reason could be borrow to invest
governments can usually borrow at low
rates and they can invest in public
goods and infrastructure that benefits
the economy could be bad reasons like
wanting to spend a lot without taxing
the population that's electoral
beneficial sometimes but I think a very
important thing and you can see that
here has to do with crisis stabilization
so you see that this accelerates around
the global financial crisis in 2008 or
2009 and the reason is that when the
private sector suddenly stopped spending
the economy can collapse if you want to
arrest that collapse the government has
to do deficit spending so they start
borrowing basically in order to
stabilize the economy and that's what
happened there so that explains why
governments want to borrow so much but
given the increase has happened at
around a time of crisis why would
anybody be lending to them well that
depends a bit on the country there are a
bunch of different measures that
investors might look at one is simply to
look at how much debt the country
already has to service and we can see
just how much that varies if you look at
the different countries here from Japan
infamously huge debt to GDP Greece of
course has been in crisis for years and
years and then down to some of the
newcomers to debt markets Saudi Arabia
and Argentina both entered markets in
2016 after being out for a while very
different reasons sounded because they
didn't need the money Argentina because
they were in court for non-payment but
the point is that they had very little
debt outstanding so once any you know
legal issues are sorted out these would
seem like good credits so credit
worthiness isn't just about the amount
of money that a country
already borrowed it's it's not just
about that that that factors in if
somebody doesn't know anything why
wouldn't you lend to them but another
thing people look at is does the central
bank does the government issue debt in
its own currency does its central bank
print the money that eventually it uses
to to pay back so Japan seems like a
safe place because it borrows in yen
largely so I think we have a third chart
that shows the sorts of returns that
investors can get if they are lending
money to Japan and they are extremely
small so I wonder how long you think
that this credit boom can continue they
are in fact negative yeah we see here
the green line has gone below zero which
is how much the Japanese government has
to pay to borrow for ten years actually
it's getting paid to take money for ten
years that's extreme but you see the
same in Germany you see the same pattern
the downward slope in borrowing cost for
pretty much every government in the
world got US and UK in in red and blue
here the reason is because central banks
are being really active trying to pump
money into the economy to get growth
going that drives interest rates down
and that makes it easy for governments
to borrow so it's the central banks that
are fueling this credit boom in
government debt in part it's in part the
central banks it's also that the private
sector isn't that keen on spending wants
to save and so there's a lot of saving
that has to go somewhere
government still seemed to be the safest
most creditworthy borrowers out there on
the whole so you know with this wall of
money coming both from central banks and
from private savers governments are
there and can pick up cheap borrowing so
the boom will continue for the
foreseeable future martin thank you very
much