Committee for the Abolition of Illegitimate Debt

 New wave of corporate debt on the horizon

Corporate debt is rapidly approaching $100 trillion, just as public debt surpassed that threshold earlier this year

Specifically, last year’s final quarterly Monitor warns of a new wave of corporate debt on the horizon. The pace of debt accumulation by non-financial companies has increased significantly, driven once again by more flexible financing conditions, both domestically and internationally.

Corporate debt is rapidly approaching $100 trillion, just as public debt surpassed that threshold earlier this year. The increase has been particularly pronounced in China, France, Germany and the United States, where corporate high-yield Yield The income return on an investment. This refers to the interest or dividends received from a security and is usually expressed annually as a percentage based on the investment’s cost, its current market value or its face value. bond Bond A bond is a stake in a debt issued by a company or governmental body. The holder of the bond, the creditor, is entitled to interest and reimbursement of the principal. If the company is listed, the holder can also sell the bond on a stock-exchange. issuance reached an all-time high. [2]

According to the report, the increase in corporate debt has been particularly notable among companies linked to artificial intelligence, with the boom in data centre construction and associated debt. A similar pattern has been observed in new energy companies, where the increase in market debt has been driven mainly by Chinese companies, followed by Brazil and Korea. In contrast, and despite strong investor interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. , the ability of defence companies to access debt markets has been limited. However, as governments seek to modernise their defence architecture and mobilise private sector financing, “close monitoring of debt dynamics across the defense industry will be essential,” it says.

growing leverage in the AI, clean tech and defense sector borrowing should shape credit markets over the next several years

“In short, growing leverage Leverage This is the ratio between funds borrowed for investment and the personal funds or equity that backs them up. A company may have borrowed much more than its capitalized value, in which case it is said to be ’highly leveraged’. The more highly a company is leveraged, the higher the risk associated with lending to the company; but higher also are the possible profits that it may realise as compared with its own value. in the AI, clean tech and defense sector borrowing should shape credit markets over the next several years. While many AI and tech firms have traditionally financed investment through internal cash flows—and defense firms’ access to capital markets has historically been limited—there is now a clear shift toward more active use of bond markets, expanded bank borrowing (including securitization of bank loans), and greater reliance on private debt,” summarises the Global Debt Monitor.

 Private capital in global markets

Private capital markets still represent only a small fraction of the nearly $500 trillion global financial system

The report focuses on the concept of private credit, of which, it says “There is no single agreed upon definition.” Notwithstanding conceptual differences, the private debt market has grown rapidly, from $500 billion in 2004 to nearly $1.8 trillion in 2023, according to widely cited estimates from the London-based investment data company Preqin [3].

Most private credit borrowings have been concentrated in the technology, finance and consumer-goods sectors. Although this rapid expansion has attracted greater scrutiny from investors and regulators, the Monitor notes that private debt markets still represent only a small fraction of the nearly $500 trillion global financial system.

Looking ahead, continued easing by major central banks and a renewed search for yield should provide a boost to private debt, which has been under pressure in recent years as higher Treasury yields have displaced investor appetite for this asset Asset Something belonging to an individual or a business that has value or the power to earn money (FT). The opposite of assets are liabilities, that is the part of the balance sheet reflecting a company’s resources (the capital contributed by the partners, provisions for contingencies and charges, as well as the outstanding debts). class.

 Household debt in the spotlight

The data also reflect households’ diminished capacity to take on new debt amid such high political uncertainty

Household debt increased by approximately $4 trillion in the first three quarters of 2025, reaching almost $64 trillion. Most of the increase came from China, the United States and Germany. That said, debt has grown at a slower pace than GDP GDP
Gross Domestic Product Gross Domestic Product is an aggregate measure of total production within a given territory equal to the sum of the gross values added. The measure is notoriously incomplete; for example it does not take into account any activity that does not enter into a commercial exchange. The GDP takes into account both the production of goods and the production of services. Economic growth is defined as the variation of the GDP from one period to another. , bringing the global household debt-to-GDP ratio down to 57%, its lowest level since 2015. The drop is mainly due to mature markets, while emerging-market ratios have remained pretty much stable at 40-45% since 2020.

While this may indicate healthier balance Balance End of year statement of a company’s assets (what the company possesses) and liabilities (what it owes). In other words, the assets provide information about how the funds collected by the company have been used; and the liabilities, about the origins of those funds. sheets, it also reflects households’ diminished capacity to take on new debt amid such high political uncertainty. With fewer elections ahead following the 2023–25 supercycle, easing financing conditions could support a modest rebound in borrowing. Even so, cost-of-living pressures and affordability constraints remain the key forces shaping consumer confidence and demand for loans, and upcoming election results are likely to add another layer of uncertainty.

 What to watch in public debt: Tariffs and Defence

The report says it is unclear how governments will finance higher defence spending without further straining already tight budgets

The Global Debt Monitor asserts that the increase in global debt continues to be concentrated in the public sector, with China and the United States once again recording the largest increases, followed by France, Italy, and Brazil. With budget deficits still high, and the impact of large fiscal stimulus packages set to begin in 2026 in Japan, the United States, Germany and China, sovereign countries are likely to continue increasing their debt burden and interest expenses. As a result, investor attention is increasingly shifting towards government bond auctions and public debt plans.

The IIF report points to a potential adverse Supreme Court ruling on the application of Trump’s tariffs as a “notable risk” that could disrupt trade policy and revenue projections, potentially forcing the US Treasury to borrow even more to cover the fiscal costs associated with the controversial tax law known as the “One Big Beautiful Bill.” [4]

It also points out that it is unclear how the recent increase in defence spending by major countries will unfold, or how governments will finance higher spending without further straining already tight budgets. This could force difficult trade-offs between defence and other spending priorities. Some European countries could find themselves in a particularly difficult position, with limited scope for raising additional public revenue, given that they already have some of the highest public revenue-to-GDP ratios in the world.

 Davos: Debt, AI, the IMF and BlackRock

BlackRock CEO Larry Fink denies that an AI bubble exists. But his opinion is not disinterested. His firm is an investor in each and every one of the so-called Magnificent Seven: Apple, Amazon, Meta, Microsoft, Alphabet, Nvidia and Tesla.

The director of the International Monetary Fund IMF
International Monetary Fund Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org (IMF), Kristalina Georgieva, spoke specifically about debt and AI at the recent World Economic Forum in Davos: 3% growth, she said, is “beautiful but not enough.” (...) “I want to appeal to all of you: do not fall into complacency. Growth is not strong enough. And that is why the debt weighing on our shoulders, which is approaching 100% of GDP, will be a very heavy burden,” Georgieva said. [5]

In her analysis, high levels of global debt limit the capacity to respond to crises and structural transformations, especially in a context of rapid changes in employment and technology. In this regard, she pointed out that AI will have a direct impact on the labour market. According to estimates by the agency she heads, 60% of jobs in advanced economies will be affected by this technology, either through improvements, transformations or job losses, while globally the impact will reach 40% of employment. For Georgieva, this scenario requires active policies and fiscal resources that are currently constrained by debt [6].

Regarding artificial intelligence and the bubble that more and more voices are warning about, [7]
BlackRock CEO Larry Fink, who served as interim co-chair of Davos for the first time this year, [8] has stated that he “sincerely believes” that such an AI bubble does not exist. [9] But his opinion is not disinterested. Not surprisingly, his asset management firm is an investor in many of these big tech companies. [10]BlackRock owns shares in each and every one of the so-called Magnificent Seven: Apple, Amazon, Meta, Microsoft, Alphabet, Nvidia and Tesla.