Global Debt to Equity Ratio, 2005 - 2010

by: Paul Kedrosky

For an upcoming presentation I have been looking at changes in the global debt to equity ratio over the last decade or so. Specifically, I’ve been analyzing the ratio of total global debt – corporates plus government issuance, both domestic and international – versus total world equity market capitalization over the period.

Here is a graphical look at recent trends in the ratio. Interestingly, despite the massive increases in debt issuance in developed countries, and declining capital markets, on a global basis our debt/equity ratio has declining in the last year. This is, of course, a function more of rapid increases in global equity markets than of debt destruction, and, to a lesser degree it is being driven more by emerging markets than developed markets. Nevertheless, it is worth noting.

debt-equity

Finally, this is only in the last five years, so I’ll leave it as an exercise for the reader to guess what this ratio looked like in the 1990s and 1980s.