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Data: Institute of International Finance; Chart: Danielle Alberti/Axios

A major issue that will complicate any potential recovery is the extreme level of debt corporations and governments around the world have built up, much of it predating the pandemic.

By the numbers: To dig themselves out of the hole COVID-19 created, governments and corporations have added significantly to their already heavy debt loads.

  • The Institute of International Finance reported last month that as of the third quarter this year global debt had reached 364% of the world's GDP, having climbed by 30 percentage points between Q1 and Q2 this year.
  • Global debt was less than 310% of global GDP as recently as 2014.

What they're saying: The wrong answer is to turn a blind eye to this," former Bank of India governor Raghuram Rajan said.

  • "We know from the experience in places like Japan after their bubble burst that the sooner you fix the problem the more you get back to strong, sustained growth."
  • "And if you don’t, the problem just gets bigger."

Yes, but: In addition to being an issue that governments have ignored over the past decade — and especially the past four years — it is virtually impossible to know the size of the problem because "it’s been disguised a lot by the extensive support that’s in place," Rajan added.

  • "But we will see the extent of corporate distress when we come out [of the pandemic]."

Why you'll hear about this again: "Many firms have used existing cash buffers to soften the drop in demand," a group of economists, academics and central bankers that includes former chair of the Council of Economic Advisers Jason Furman, former European Central Bank chair Mario Draghi, and People's Bank of China governor Yi Gang wrote in a report for the Group of 30 (G30).

  • "However, many studies have found that the strain of continued lockdowns will quickly exhaust cash buffers for many firms."
  • "A Bank for International Settlements (BIS) study estimated that if 2020 revenues fall by 25 percent and firms are not able to roll over debt, cash buffers and revenues will be exceeded by debt service and operating costs in more than half of the sampled corporates across 26 countries."

Editor's note: This article has been edited to state that global debt was less than 310% of global GDP as recently as 2014, rather than 210%.

Go deeper

Dion Rabouin, author of Markets
Jan 20, 2021 - Economy & Business

Janet Yellen said all the right things to reassure the markets

Illustration: Aïda Amer/Axios

Treasury Secretary nominee and former Fed chair Janet Yellen's confirmation hearing before the Senate Finance Committee on Tuesday showed markets just what they can expect from the administration of President-elect Joe Biden: more of what they got under President Trump — at least for now.

What it means: Investors and big companies reaped the benefits of ultralow U.S. interest rates and low taxes for most of Trump's term as well as significant increases in government spending, even before the coronavirus pandemic.

59 mins ago - Health

Treasury begins dispersing $350 billion in COVID relief funding to states and localities

Treasury Secretary Janet Yellen. Photo: Tasos Katopodis/UPI/Bloomberg via Getty Images

The U.S. Treasury on Monday began giving state and local governments access to $350 billion in emergency funding from the American Rescue Plan, the department announced Monday.

Why it matters: Though the money is aimed at helping state, local, territorial and tribal governments recover from the pandemic's economic fallout, the administration will generally give them wide latitude on how they can use the funds.

Game developers break silence around salaries

Illustration: Annelise Capossela/Axios

Developers are sharing their salaries on Twitter under the hashtag #GameDevPaidMe to encourage pay transparency in their industry.

The big picture: The hashtag started circulating last year, but has returned periodically as developers fight for better working conditions. Salary sharing is a way to equalize the field. By removing the secrecy, as well as the stigma, around discussing pay, workers have more power to advocate for themselves when negotiating salaries and raises.