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The world debt ratio rose by 500 billion USD last year to a record 217 trillion USD against the backdrop of the preparation of central banks to end the policy of cheap lending. The markets this week have been shaken by central banker warnings of overvalued assets, excessive consumer lending, and the need to start a process of normalizing interest rates in the world, which are now at extremely low levels to mitigate the effects of credit crash in 2009.

The years of cheap bank lending have led to euphoria in world stock markets that have recorded record growths. The side effect of this, however, is the enormous growth of loans, as households, companies and governments rushed to borrow aiming to take advantage of record low interest rates.

As a result, global indebtedness now stands at 327% of global gross domestic product, according to the Institute of International Finance report.

The Institute notes that debt is mainly due to an increase of 3 trillion USD in the developing world. The total indebtedness there now being 56 trillion USD. This is 218% of the total gross domestic product of developing countries or an increase of 5% on an annual basis.

China has 2 trillion USD of debt increase and now the country’s debt is 33 trillion USD.

According to the report, developed economies continued to reduce their indebtedness by lowering total government and private debt by more than 2 trillion USD in the past year, but this is mainly due to the Eurozone. The total US debt has risen by 2 trillion USD to over 63 trillion USD.