“Summer Charts” is a series of current financial topics explained in dots, lines, and only a few words—just the right “mix” to concisely convey ideas for critical thinking about investing.
Trillions of dollars created by policymakers continue to support the “healing process” of the global economy and especially the financial system. Unprecedented conditions experienced in 2008/2009 called for governments to spend their excess savings with a focus on economic stability (think Japan). Yet, as a “byproduct,” global debt has increased by $57 trillion since 2009, mainly in the form of government obligations (not even accounting for unfunded commitments, such as Medicare, Social Security, etc., in the U.S.).
Empirical evidence suggests that not only are recessions much deeper after credit booms, but also that negative effects on economic expenditures will not be mitigated if interest rates are close to (or at) the lower bound. It is important to recognize the impact of debt and its servicing cost in relation to economic growth and prosperity—likely an unproductive mix at current levels, leading us into our future.
Matthias Paul Kuhlmey is a Partner and Head of Global Investment Solutions (GIS) at HighTower Advisors. He serves as wealth manager to High Net Worth and Ultra-High Net Worth Individuals, Family Offices, and Institutions.