Warning: Fed Rate Hike Could Trigger Debt Crisis

AP Photo/Jacquelyn Martin, File

Economists are warning that a possible hike in interest rates by the Federal Reserve could trigger a global debt crisis that would pale the ‘Great Recession’ of 2008 in comparison.

According to reports, borrowing by foreign governments has reached an epic $9.6 trillion mark in which a long gravy train of liquidity has propped up what otherwise would have been a serious global contraction.

By raising interest rates, the Fed would cause a ripple effect that would serve as an impediment to further borrowing, despite that U.S. debt has served as the stop-gap for many developed nations still recovering from the housing market collapse.

In the Eurozone, lending by the European Central Bank has similarly forestalled cataclysmic economic events. But that reality poses the stark question: which is worse, a global debt crisis or a further perpetuated glut of debt that must come crashing down eventually.