World needs $100 trillion more credit, says World Economic Forum

The Telegraph UK (Link) - Emma Rowley (January 18, 2011)

The world�s expected economic growth will have to be supported by an extra $100 trillion (�63 trillion) in credit over the next decade, according to the World Economic Forum.

This doubling of existing credit levels could be achieved without increasing the risk of a major crisis, said the report from the WEF ahead of its high-profile annual meeting in Davos.

But researchers warned that leaders must be wary of new credit �hotspots,� where too much lending takes place, as the world emerges from a financial catastrophe blamed in large part �to the failure of the financial system to detect and constrain� these areas of unsustainable debt.

�Pockets of credit grew rapidly to excess � and brought the entire financial system to the brink of collapse,� said the report, written in conjunction with consulting firm McKinsey. �Yet, credit is the lifeblood of the economy, and much more of it will be needed to sustain the recovery and enable the developing world to achieve its growth potential.�

The global credit stock has already doubled in recent years, from $57 trillion to $109 trillion between 2000 and 2009, according to the report.

The WEF said the continued demand for credit could be met �responsibly, sustainably � and with fewer crises.� However, it cautioned that to achieve this goal, financial institutions, regulators, and policy makers need more robust indicators of unsustainable lending, risk, and credit shortages. �