According to the Institute of International Finance report, global debt increased by US$ 3.3 trillion last year to US$ 243 trillion. Economists warn that when this multi-trillion dollar bomb planted under the global economy explodes, the crisis will be worse than that of 2008. This is a record three times higher than world GDP. In developed countries, the extremely high indebtedness ratio reached 390% of GDP. The world economy may not be able to withstand to the debt of US$ 243 trillion dollars. Is the end of globalized capitalism?

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WORLD ECONOMY TOWARD BANKRUPTCY
Fernando Alcoforado*
According to the Institute of International Finance report, global debt increased by US$
3.3 trillion last year to US$ 243 trillion. Economists warn that when this multi-trillion
dollar bomb planted under the global economy explodes, the crisis will be worse than
that of 2008. This is a record three times higher than world GDP. In developed
countries, the extremely high indebtedness ratio reached 390% of GDP, while in
emerging markets the effect was the opposite with the increase in debt, which has
slowed to its lowest level since 2001. The world economy may not be able to withstand
to the debt of US$ 243 trillion dollars. Is the end of globalized capitalism?
This uncontrollable and gigantic debt is the result of the irresponsible policy of the
central banks of the world's countries that have become unable to control the public
deficit and are addicted to printing money by generating inflation and contracting debts.
Global central banks are creating debt without worrying about what might happen in the
future. At the end of 2018, the International Monetary Fund (IMF) pointed to
unsustainable global debt as the main threat to the world economy. The IMF said
governments in most countries have failed to adopt the necessary reforms to protect the
banking system from the risky actions of financiers that have caused a powerful chain
reaction and the collapse of 2008. The real global debt machine is the United States ,
whose deficit has nearly tripled since 2000 and now exceeds US$ 73.6 trillion,
representing 106% of GDP.
Non-financial corporate debt in the United States is close to highs before the 2008
crisis. Many financial analysts believe that no matter how much the Trump
administration tries to get rid of the excessive debt burden by the end of the second
presidential term, the trend increase in US public debt will not be reversed, as the
budget situation is worsening. The US federal budget deficit increased 17 percent in
fiscal year 2018 to US$ 779 billion. In the short term, this trend will continue due to
lower tax revenues and increased defense spending.
The Congressional Budget Department predicts that this year's fiscal deficit will be US$
897 billion and by 2022 will exceed the trillion dollar. Investment banks, however,
believe US public debt will reach 140 percent of GDP by 2024. Experts speculate that
the US government has little time to reverse this situation, which otherwise would lead
to a full-scale crisis comparable to the Great Depression of the 1930s. If the global
economy cannot digest this huge debt, the ensuing crisis will lead the world to
economic depression, mass poverty, geopolitical instability, political turmoil and wars.
According to François Chesnais, professor emeritus at the University of Paris, 13 this
whole situation stems from the functioning of the world economy, which since the early
2000s has been based on two pillars: the debt-driven growth regime adopted by the
United States and Europe, and the global export-oriented growth regime, where China is
the main industrial base and Brazil, Argentina and Indonesia are the key providers of
natural resources. In Chesnais's view, this crisis represents the dead end, the absolute
impasse of the debt-led regime. Chesnais says the second pillar is slightly better, but
growth based on global exports will not work for long without strong external demand,
especially from the United States and the European Union. This means that China's

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commodity demand will not be able to compensate for the likely fall in demand from
the United States and the European Union (CHESNAIS, François. Les dettes illégitime.
Quand 2ês banques font main basse sur 2ês politiques publiques. Paris: Editions
Raisons d´agir, 2011).
The ongoing global crisis is a product of changes that have been going on in the world
for several years. Half a century ago, banking seemed to be a relatively simple art.
Banks underwent a process of transformation into their core business, leaving behind
their classic role of intermediary between savers and lenders. Benefiting from the
opening of the world economy since the 1990s, these institutions have become
diversified financial groups and conglomerates whose profits come mainly from the
creation of credit, which has become the main means of creating currency. In this
process, the Central Banks of all the countries of the world have completely lost control
of their national economies. The global transaction values cited by Chesnais illustrate
the size of the financial sector: in 2002, world GDP was US$ 32.3 trillion, while
financial transactions amounted to US$ 1,140.6 trillion. At the beginning of the crisis, in
2008, while the world GDP was US$ 60.1 trillion, financial movements reached US$
3.628 trillion dollars.
The cycle of expansion and accumulation of global financial capitalism has stumbled
upon the huge global financial crisis and the synchronized slowdown in economic
activity with the global crisis of 2008. Since the outbreak of the global crisis in 2008,
governments around the world have become hostages of system adopting fiscal and
monetary policies favorable to banks to save them from bankruptcy and contrary to the
interests of their populations. Chesnais says that in 2008, the threat to global finance
came from US investment banks and major insurers. The next major financial episode
will happen when a segment of Europe's banking system collapses in Greece, Spain or
Italy that is under way.
According to François Chesnais, there will be no end to the global crisis as long as
banks and financial investors are in command of the world economy, with governments
adopting policies entirely driven by the interest of the rentiers and to give survival to the
debt-driven regime as it has been happening today. The world capitalist system is
headed toward the possibility of a combination of financial collapse with immense
recession, if not worse as the depression that will surely change the world. There is
every reason to believe that, before its collapse, the world capitalist system will be
ruined by economic depression for many years leading to the collapse of many firms,
the economic indebtedness of the heavily indebted nation states, and mass
unemployment on a planetary scale.
To prevent the outbreak of a new global crisis, there is an urgent need to establish a
stable international monetary system, which is not subordinated to financial capital. The
conditions for this include the cancellation of much of the sovereign debt considered
illegitimate, as well as a large part of the domestic debt, the adoption of a correct
taxation for finance and capital income, the reestablishment of a real public control of
the system a tight control of capital flows and an effective fight against tax havens. This
means that governments should stop subordinating themselves to the dictates of
financial capital and suspend the payment of their debts even if they lead some banks to
bankrupt whose resources that would be destined to be invested in public investments to
resume economic growth.

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In the face of the chaos that has dominated the world economy that is bound to worsen,
the time has come for each country and humanity to equip themselves as urgently as
possible with the necessary instruments to control their destiny, given the world
capitalist system be an excellent example of entropy because it has declining yields and
tends to collapse as an economic system. Until it collapses, the world capitalist system
will, during this period, produce deaths and destruction on an unprecedented scale in the
history of mankind in all quarters of the Earth. The barbarism characterized by revolts
and social revolutions in each country and by international conflicts will be the main
mark of the world capitalist system until the end of its trajectory. To have control of its
destiny mankind must replace the world capitalist system with a new economic order
that is capable of exercising the governability of the economy and ensuring world peace.
This is the only means of survival of the human species.
* Fernando Alcoforado, 79, awarded the medal of Engineering Merit of the CONFEA / CREA System,
member of the Bahia Academy of Education, engineer and doctor in Territorial Planning and Regional
Development by the University of Barcelona, university professor and consultant in the areas of strategic
planning, business planning, regional planning and planning of energy systems, is the author of 14 books
addressing issues such as Globalization and Development, Brazilian Economy, Global Warming and
Climate Change, The Factors that Condition Economic and Social Development, Energy in the world and
The Great Scientific, Economic, and Social Revolutions that Changed the World.