…a default cycle in commodity-related areas at this point is unavoidable, and the only real question here is whether it stays contained to those areas or extends itself to other sectors”) and soon for most other sectors.
…The current credit cycle can be described as mature: it’s old enough, at almost five years, and extended itself far enough (55% debt growth) to be falling right in line with three cycles that came before it in the past 30 years. A widely publicized McKinsey1 study earlier this year estimated a total of new debt created since 2007 at $50trln, half of which came from EM and two-thirds from nonfinancial corporate issuers in DM and EM. Our research suggests that global debt growth rates have remained steady as a percentage of global GDP, at 64%.
The full text of this article is available to MacroBusiness subscribers
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
