"The Next Debt Bombs," David Leonhardt, The New York Times

The Next Debt Bombs David Leonhardt, The New York Times “The world has never had as much debt as it has right now,” Aaron Kuriloff of The Wall Street Journal wrote earlier this year.

The world’s combined debt — held by governments, consumers and businesses — has risen to more than 300 percent of global gross domestic product, the paper explained. There’s nothing magical about that number, but it was notably higher than the level in 2007, before the financial crisis began, when it was about 260 percent.

Since then, many consumers have cut down on their debt, but governments and companies outside of the financial sector have taken on more. Some of the riskiest loans, Kuriloff wrote, seem to include “corporate debt in China, foreign-currency borrowing in emerging markets” and riskier corporate loans in the United States.

The obvious question is whether the rise in borrowing has put the global economy in danger of another financial crisis. It’s impossible to know the answer. But I think there are reasons for concern.

Governments and many businesses have high levels of debt — while many middle-class and lower-income families across Europe and the United States have been struggling with slow-growing incomes. Historically, periods of extreme economic inequality, like the 1920s and the early 2000s, have been prone to financial crisis.

In an essay published this morning on Medium, Elizabeth Warren argues that the United States economy is at greater risk of a debt-caused crisis than many have realized. Obviously, Warren — as a Democratic presidential candidate — has an interest in suggesting that the economy is weaker than it appears. But she also has a track record of prophetically warning about systemic financial problems. So it’s worth giving her a hearing.

“The financial markets agree that there is a serious risk of downturn in the near future,” Warren writes. “The U.S. Treasury yield curve — a barometer for market confidence — normally slopes upwards because investors demand higher yields for bonds with longer maturities. But this March, it inverted for the first time since 2007, signaling that investors are so worried that things are going to get worse that they’d rather lock in lower rates for the future today than risk long-term rates going even lower. The curve has inverted before each and every recession in the past half century — with only one false signal.”

Most professional forecasters say a recession is unlikely in the next 12 months, but it’s hard to put too much stock in that prediction — because professional forecasters almost always say a recession is unlikely in the next 12 months.

Related: “Here are all the Recession Warning Signals That Have Already Gone Off,” Anne Sraders recently wrote in Fortune. What’s America’s Winning Hand if Russia Plays the China Card? By THE EDITORIAL BOARD The two adversaries are growing closer, posing a strategic challenge to the United States.