The Disturbing Increase in Worldwide Household Debt

Ten years after the worldwide financial crisis, household indebtedness is viewed by many financial experts as a thing of the past, not a present crisis. But there are places were it still stings hard. Such places include Australia, Norway, Canada, and Switzerland. In those countries, among others, the rising tide of household debt is posing quite a problem for the average citizen. The above mentioned countries now have more credit card and automobile loan debt and larger mortgage rates than the United States had nearly a decade ago at the height of the financial bubble.

At the top of the list is the country of Switzerland; there, household debt has reached a staggering 127.5% of their gross domestic output — that’s from data collected by the Bank for International settlements and the Oxford Economics Team. The IMF pegs a 65% spike in household debt tied to the GDP ratio as the cut off point before a financial debacle is likely.  

The IMF has identified ten current national economies where the debt ceiling should trigger red flags, including South Korea, Thailand, Hong Kong, Finland, and New Zealand. The Swiss, Australian, and Canadian economies have seen household debt ratios grow by an average of seven percent during the past 3 years, which has not been seen since the housing bubble burst in the United States ten years ago. South Korea and Norway are seeing rates even higher.

Although the countries on the debt danger list are physically disparate, they have  several things in common. Most are First World economies with stable financial institutions that avoided many of the worst excesses of the financial collapse a decade ago. Their housing markets are considered extremely stable. But if household debt continues to climb too fast, some kind of market readjust is inevitable.