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Do you believe there is a global debt supercycle?

Neomalthusian

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The Debt Supercycle is a description of the long-term decline in U.S. balance sheet liquidity and rise in indebtedness during the post-WWII period. Economic expansions have always been associated with a build-up of leverage. However, prior to the introduction of automatic stabilizers such as the welfare state and deposit insurance, balance sheet excesses tended to be fully unwound during economic downturns, albeit at the cost of severe declines in activity.

Government policies to smooth out the business cycle were successful in preventing the frequent depressions that plagued the pre-WWII economy, but the downside was that the balance sheet imbalances and financial excesses built up during each expansion phase were never fully unwound.

Periodic “cyclical” corrections to the buildup of debt and illiquidity occurred during recessions, but these were never enough to reverse the long-run trend. Although liquidity was rebuilt during a recession, it did not return to its previous cyclical high. Meanwhile, the liquidity rundown during the next expansion phase established new lows.

These trends led to growing illiquidity, and vulnerability in the financial markets. The greater the degree of illiquidity in the economy, the greater is the threat of deflation. Thus, the bigger that balance sheet excesses become, the more painful the corrective process would be. So, the stakes have become higher in each cycle, putting ever-increasing pressure on the authorities to reflate demand, by whatever means are available. The Supercycle process is driven over time by the building tension between rising underlying deflationary risks in the economy, and the ability of policymakers to create inflation.

The Supercycle reached an important inflection point in the recent economic and financial meltdown with the authorities reaching the limit of their ability to get consumers to take on more leverage. This forced the government to leverage itself up instead. Once fiscal policy is pushed to the limits of sustainability, the Debt Supercycle could come to a violent end.

LINK
Kyle Bass On The End Of The Debt Super-Cycle

The Debt Supercycle Reaches Its Final Chapter
 
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Goshin

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Is it a Harley or a BMW supercycle?
 

the_recruit

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The Supercycle is just an illusion to distract us from the real problem.......SUPERAIDS!

 

Gimmesometruth

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Household and corporate debt have risen faster than govt debt, all combined are near 400% of GDP. Household debt is still primarily mortgage. A lot of household debt declines recently are due to refi of mortgages. The articles are hinting of a major decline in total debt, the way for continued declines in household debt is not clear, since 2005 bankruptcies for individuals has become more difficult and wages are not increasing, in real terms they have been stagnate (since 1980, when personal debt really took off). I suppose business defaults could increase, but they still have access to lots of capital and lately have been taking on more debt in spite of having lots of cash reserves. Previously, the last great debt decline was in 1933 thru 1940, that was a long unwinding of personal debt while govt debt increased modestly.









So....is there a "cycle"?

Mmm...dunno.....since this would be a first real cycle....from what I can gather from your sources.
 

blaxshep

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No cycle just people and government living way beyond their needs.
 

cpwill

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Roughly... ish. Yes. I think that his call on Japan is a bit too close (I think they will have more time than he does - not by much, but a year or two), but broadly Bass is correct.
 
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