Loading ...In 2009, most of the risk in the financial and credit markets had been wrung out from the decline. Today, the markets are more exposed than ever to leverage and credit risk throughout the global ecosystem.
My friend Doug Kass had a great note Friday related to this risk.
“Astonishingly I heard a ‘talking head’ on one of the business media platforms earlier this week who said that none of the excesses that existed in past recessionary periods are in place today.To say excesses, systemic issues, and possible instability, don’t exist is borderline irresponsible.As I see it, there are several measurable excesses and associated risks that represent this cycle’s new challenges that may be summarized into these five categories:
- An untenable level of global (private and public sector) debt
- Structural instability and growth threats in the form of rising deficits and demographic trends (i.e., slowing population growth)
- Lack of (sovereign) cooperation
- Unparalleled political instability and rising policy risks
- A dangerous shift in market structure
DebtDebt that is not self-funding is future consumption brought forward.Through years of unprecedented monetary ease, we have enjoyed unsustainable consumption and growth which cannot continue at its current pace in the future. Debt, then, is a drag on future growth, and the amount of debt the world now has will be a monster drag on that growth.The fact is that the global economies are over levered with debt in our private and public sectors that are excessive. As I chronicled in “Why Interest Rates Are the Bull Market’s Most Serious Threat,” in the fullness of time, the weight of debt will act as a governor to economic growth – it saps capital. To think otherwise is foolhardy.
https://www.zerohedge.com/news/2019-03-09/what-do-central-bankers-know