When the next economic crisis hits, it will probably be related to the problem graphically illustrated above. The world's economy is punch drunk on easy money, which is propping up an illusory 'economic expansion'. After ten years of inflating balance sheets, central banks including the FED, are trapped in a corner of continuing the policies that got us here, or risking an historic economic collapse. As the minutes from the latest FED policy meeting noted, "A few participants observed that the appropriate path for policy,
insofar as it implied lower interest rates for longer periods of time, could lead to greater financial stability risks".
Since 2003 global debt has soared. It is now pegged at $247 trillion, or 318% of global GDP. Corporate debt in the US is also historically high at $9 trillion. Of course all that debt has to be serviced at interest, and interest rates are rising so it may cause distress for some firms unable to rollover at higher rates. Cash to debt ratio fell to 12% in 2017, the lowest level ever. Some formerly guilt-edged companies like
GE are seeing their corporate bonds slide from low investment grade to junk. U.S. consumers are more than 13 trillion dollars in debt--its all part of the Bubble Everything economy!
