EIGHT years have passed since subprime mortgages started to go disastrously wrong, but the after-effects of the debt crisis are still around. So, as a new report from the McKinsey Global Institute* makes clear, is the debt. In fact, there is even more of it.

Global debt has risen by $57 trillion since 2007—an annual increase of 5.3%. That is not dramatically slower than the 7.3% annual growth rate between 2000 and 2007, a period widely seen as a credit boom. If the financial sector is excluded, no leading economy has managed to reduce its debt-to-GDP ratio; 14 countries have seen their ratios rise by more than 50 percentage points (see chart).

In some cases, such as Ireland, this increase merely reflects the fact that financial-sector debt has ended up on the government’s balance-sheet because of bank rescues. Shifting debt from the private to the public sector is in some respects a positive step; governments can borrow at a cheaper rate than companies and individuals and, if they have their own currency, have considerable scope to expand their balance-sheets.

Nor is higher debt automatically a problem: debt is a useful way for creditors and borrowers to spread their cash flows over time. In a developing country, rising debt levels may be a sign that the economy is getting more sophisticated. Even a developed economy has no definite threshold at which debt levels become “too high”.

But high debt levels do matter. Quips that net global debt is still zero, whatever the sums being borrowed, are wide of the mark. The first problem is that a lot of debt is secured against property and, when prices fall, both creditors and debtors lose out. When credit expands, homeowners can afford higher house prices; their rising demand pushes prices up further, which increases banks’ willingness to lend. McKinsey finds a strong correlation between household debt and house prices in both the countries and the individual American states it studied. They also find that countries where a single city is dominant (as London is in Britain) have higher property prices and more debt. Seven countries, by McKinsey’s reckoning, are still vulnerable to debt-laden housing busts: namely, Australia, Canada, Malaysia, the Netherlands, South Korea, Sweden and Thailand.

A second problem with high debt levels is the need to refinance regularly. Ten countries have debt ratios of more than 300% of GDP; if the average maturity of debt is five years, then 60% of GDP must be refinanced every year. If creditors lose confidence in debtors’ ability or willingness to repay, a crisis can occur very quickly.

The lack of deleveraging since the crisis indicates the sheer difficulty of eliminating a high debt burden. Write-offs may merely transfer the burden from one party to another. Inflation can work for a while, although eventually creditors will get wise to what is happening and demand higher nominal interest rates to compensate. The key to bringing down a high debt ratio is rapid economic growth, which the developed world has struggled to bring about. Keynesians would say that this failure reflects an excessive focus on public-sector austerity, but demography is also a constraint, and a lasting one: workforces in many developed countries are stagnant or shrinking.

The report cites the examples of Sweden and Finland, which emerged from debt crises in the 1990s. But it points out that both countries were open to trade, and were able to use currency depreciation to boost their exports when the global economy was strong. Today’s economic problems are widespread and not all currencies can depreciate at once. It is therefore hardly surprising that central banks have set interest rates near zero, or even below it: their economies could not stand the strain of higher rates.

The report has various proposals for reducing the impact of bad debts, such as shared-equity mortgages, which would enable lenders to enjoy some of the gains from higher house prices, in return for taking some of the pain from lower ones. It is not clear, however, whether such an idea would take hold without official help. Lenders would surely charge higher rates to compensate for the risk of loss. Reducing tax incentives for debt is another good idea, but one sure to meet fierce resistance, particularly in America, where tax relief on mortgages is regarded as a human right. After a while, like any feel-good drug, debt becomes addictive.