Reference News Network, January 31 report: According to the website of the U.S. "Wall Street Journal" on January 25, the global economy is addicted to government debt. This year, global economic growth will be driven by governments around the world.

Due to a large number of shocks that weaken economic growth, many countries are scrapping savings plans and launching large-scale fiscal stimulus programs funded by massive budget deficits.

In Europe, the United States, and some parts of Asia, investments in the field of artificial intelligence amounting to trillions of dollars are stimulating demand, and this spending boom is expected to boost economic growth and employment in the near future. JPMorgan said that as a result, the global economy's annualized growth rate could accelerate to 3% within the next six months.

Economists say that this may be a risky strategy during a period of low unemployment and high interest rates.

In Japan, Prime Minister Hashimoto Asahi announced that she plans to increase spending and cut consumption tax before holding early elections next month. After that, the yields on Japan's long-term government bonds surged to record highs last week. The bond selling spree affected global markets, pushing up U.S. Treasury yields.

Neil Sheehan, Chief Economist at Capital Economics International, said: "This is a dangerous signal. It is another sign of the increasing fragility of advanced economies." Sheehan said these vulnerabilities include weak private sector demand and sluggish productivity growth.

With U.S. President Trump threatening to escalate trade wars over the Greenland issue, the European economy looks especially vulnerable, with little growth sources outside of government "handouts."

According to calculations by Torsten Slöcker, Chief Economist at Apollo Global Management, fiscal stimulus measures in the world's largest economy, the United States, and the third-largest economy, Germany, will increase economic growth by about 1 percentage point this year. In Japan, the stimulus measures will increase economic growth by 0.5 percentage points.

According to data from the International Monetary Fund, the average government budget deficit in developed economies was 4.6% of GDP last year, while emerging markets were 6.3%, compared to 2.6% and 4% respectively ten years ago.

In the United States, the budget deficit is expected to reach 6% of GDP this year. In Germany, a trillion-euro defense and infrastructure spending plan will support economic growth.

Massive spending represents a strategic shift. After the global financial crisis, many countries, especially those in Europe, "tightened their belts" to appease anxious investors. Now, country leaders have realized that fiscal austerity not only is unpopular but also leads to weakened military strength and deteriorating infrastructure.

In November last year, the Canadian Parliament approved an additional $14 billion (about $10 billion) in spending over the next five years. This was boasted by Prime Minister Mark Carney as a "generational investment" to help Canada strengthen its economic power in the face of American tariffs. It includes funding to upgrade ports and other trade infrastructure, with the goal of doubling Canada's exports to non-American markets within the next decade. In the 2025-2026 fiscal year, Canada's budget deficit will rise to about 2.5% of GDP, compared to 1.6% in the previous fiscal year.

In Japan, in November last year, the government announced a fiscal stimulus package worth approximately $135 billion, aimed at alleviating high living costs and stimulating investment and military spending.

Across Europe, even right-wing parties that once advocated fiscal austerity have gained support by promising increased spending.

In the United States, the ongoing massive budget deficit reflects both significant expenditures on social security and the Trump administration's efforts to suppress taxes.

However, when recent high inflation forced central banks to raise interest rates and increase borrowing costs, it reminded people that government debt could rise sharply. In the past four years, the U.S. government's interest payments on the national debt have more than doubled; the cost for repaying government debt in Germany and Japan has roughly doubled.

Some economists say that as it becomes harder to fund fiscal spending, some countries' governments may eventually have to raise taxes or cut spending. Maurice Obstfeld, former chief economist at the International Monetary Fund, said the trigger could be investors losing confidence in the government's ability to repay its debts, or even reassessing the economic benefits brought by artificial intelligence. (Translated by Hu Jing)

Original: toutiao.com/article/7601442870200893993/

Statement: This article represents the views of the author themselves.