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In a new report, the Bank for International Settlements (BIS) - often called the "central banks' central bank" - points out that bond investors are not as smart as they think, that Western debt is much higher than officially reported (since contingent liabilities and pension debts are excluded from official numbers), and that the recovery of the world economy may be crushed by fiscal problems.
The report states:
According to the OECD, total industrialised country public sector debt is now expected to exceed 100% of GDP in 2011 – something that has never happened before in peacetime. As bad as these fiscal problems may appear, relying solely on these official figures is almost certainly very misleading. Rapidly ageing populations present a number of countries with the prospect of enormous future costs that are not wholly recognised in current budget projections. The size of these future obligations is anybody’s guess. As far as we know, there is no definite and comprehensive account of the unfunded, contingent liabilities that governments currently have accumulated.
Bank of International Settlements' Tough Assessments Don't Bode Well for World Economy
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