The (nearing) end of private sector deleveraging in DM
Conventional wisdom is that there has been little post-crisis deleveraging. And that is true, if one looks only at households, corporate and government balance sheets: the combined debts of these sectors globally went up 35% of global GDP between ’02 and’08 and then another 73% of global GDP after the global financial crisis. If we include the financial sector, the pre-crisis build-up in debt rises to 55% of global GDP, and the post-crisis debt build-up declines from 73% to 51% of global GDP. But that post-crisis debt increase still doesn’t make for very pleasant reading if one is a proponent of the debt-super-cycle theory of how growth is ultimately supposed to recover1 And history suggests recovery from crisis is slower when multiple indebted sectors are involved.