UBS calculates a global “credit impulse,” showing the extent to which there is a trend toward increasing use of debt. According to their calculations, since 2014, it is China that has been keeping the Global Credit Impulse up. If China is cutting back, and the US is cutting back as well, the situation starts looking like the 2008-2009 period, except starting from greater problems with diminishing returns
Chinese companies are aggresively develeraging. China credit creation=80% of world’s total and a warning to risky assets
Bank credit growth comes to a halt in US
I find it strange that even a relatively less leveraged country like India (as compared to china and US) is witnessing a collapse in credit demand ,where credit growth slumped to 60 years low.I understand why corporates are not borrowing but it is inexplicable why households are not borrowing especially when they are not leveraged
The economy to me is like a type of Ponzi Scheme. In absence of productivity it depends on both rising energy consumption and rising debt to sustain growth. A major function of growing debt is to add wages. Unwinding debt leads to the kinds of problems that we encountered in 2008. It is tempting for world financial leaders to think that they can find a solution to today’s problems by using higher target interest rates to slightly scale back economic growth. I don’t think that this is really a good option .Judging from the complete halt in credit creation and the softening energy prices I fail to understand what will FED achieve by raising the rates.