Debt mountains spark fears of another crisisThe world is awash with more debt than before the global financial crisis erupted in 2007, with China’s debt relative to its economic size now exceeding US levels, according to a report. Global debt has increased by $57tn since 2007 to almost $200tn — far outpacing economic growth, calculates McKinsey & Co, the consultancy. As a share of gross domestic product, debt has risen from 270 per cent to 286 per cent. McKinsey’s survey of debt across 47 countries — illustrated in an FT interactive graphic — highlights how hopes that the turmoil of the past eight years would spur widespread “deleveraging” to safer levels of indebtedness were misplaced. The report calls for “fresh approaches” to preventing future debt crises. “Overall debt relative to gross domestic product is now higher in most nations than it was before the crisis,” McKinsey reports. “Higher levels of debt pose questions about financial stability.” Overall, almost half of the increase in global debt since 2007 was in developing economies, but a third was the result of higher government debt levels in advanced economies. Households have also increased debt levels across economies — the most notable exceptions being crisis-hit countries such as Ireland and the US.  “There are few indications that the current trajectory of rising leverage will change,” the report says. “This calls into question basic assumptions about debt and deleveraging and the adequacy of tools available to manage debt and avoid future crises.” Countries that McKinsey warns face “potential vulnerabilities” because of high household debt include the Netherlands, South Korea, Canada, Sweden, Australia, Malalysia and Thailand. “It is like a balloon. If you squeeze debt in one place, it pops up somewhere else in the system,” says Richard Dobbs, one of the report’s authors. One “bright spot,” McKinsey says, is evidence of deleveraging by banks. Financial sector debt relative to GDP has declined in the US and a few other crisis-hit countries, and stabilised in other advanced economies. More