IMF Sees G7 Net Debt At 200% Of GDP By 2030; 441% By 2050

The IMF has issued a series of papers today whose sole purpose is to assuage fears that the world is headed for a sovereign default driven inferno, authored by Carlo Cottarelli and two other staffers, which concludes that markets currently "significantly overestimate" the risk of sovereign debt default in the advanced economies. The idea for the papers, according to Cottarelli, was born out of a "sense of frustration" after talking to two financial market analysts in Europe who had "no focus on numbers, but more a feeling, a sensation things are going bad and would continue to go bad." Well, actually the numbers are there, and as the IMF itself concludes G7, debt to GDP for the G7 countries which is currently 77%, will reach 200% by 2030 and 441% by 2050. But since the IMF paper is only focusing on a few months into the future, it may very well be right. In the meantime, we will stick with Morgan Stanley's recent analysis on the topic by Arnaud Mares, which concluded that sovereign defaults will happen, and likely in dramatic numbers, the only question is how.

While the bulk of the paper is nothing but a validation that the author has never read any of the works of Reinhart and Rogoff, the only relevant chart is the one below. (more)