There are five separate but related financial crises in progress currently, according to UK-based economist Andrew Hunt, including one that has yet to emerge over public sector finances.
Addressing the Sixth Annual van Eyk Research conference in Sydney yesterday, Hunt said the various US rescue and stimuli plans alone could push total public sector debt issuance this year to more than US$3.5 trillion, and amount to more than $1 trillion per annum over the next five years.
Hunt added that in the UK, total borrowing by the Government could amount to several hundred billions of pounds this year, and again in 2010, with a movement to large fiscal deficits underway in Europe. A similar though less advanced movement is also taking place in China, Japan, and Asia.
As a consequence, he said, the public sector’s financial position will be under “acute stress globally by 2010, demanding a draconian tightening of fiscal regimes around the world by the second decade of the 2000s”.
“This will by itself help to constrain global economic activity even after the private sector and financial institutions have finished their period of convalescence from the excesses of the early 2000s,” he said.
