Satyajit Das notes:
“Rising rates seem
like a valedictory return to “normality” -- a marker of how successful the
central banks’ heroic actions to counter the Great Recession were. What the
celebration misses, though, is how swelling levels of debt will amplify the
effect of any rate rises.
According to the
Institute of International Finance, global debt reached a record $237 trillion
in 2017 -- more than 327 percent of global GDP. Since 2007, when borrowing
levels were a key factor in the financial crisis, debt has increased by $68
trillion, or more than 50 percent of global GDP.
In developed
markets, the ratio of debt-to-GDP is around 380 percent. In emerging markets,
the ratio is above 200 percent. While the rate of growth has slowed, this is
only because of higher GDP growth -- driven, in part, by increased borrowing. A
decade of unprecedently low global rates and abundant liquidity appears to have
encouraged a spree of public and private debt accumulation.”
Related:
Flattening Yield Curve and the Fed:
https://www.bloomberg.com/view/articles/2018-04-12/flattening-yield-curve-is-sending-message-about-fed-s-rate-plans
Related:
Flattening Yield Curve and the Fed:
https://www.bloomberg.com/view/articles/2018-04-12/flattening-yield-curve-is-sending-message-about-fed-s-rate-plans