Sep 16, 2018 - Business

The state of debt in 2018

It's not exactly the deleveraging that many hoped for; total debt in mature economies is still near 400% of GDP, a decade after the crisis. But by the same token, after a decade of stimulus bills and bailouts and automatic stabilizers and soaring student loans and ultra-cheap funding costs, it's an achievement in itself that debt hasn't gone up.

Data: Institute of International Finance; Chart: Chris Canipe/Axios

The details: The debt is safer now, too. Governments account for more of it, while the financial-services sector has deleveraged more than anybody else. When governments run into debt trouble, they implement financial repression, which is less painful than crisis-triggering defaults.

All of this comes as U.S. homes have deleveraged their debt as well:

Data: FactSet; Chart: Andrew Witherspoon/Axios

At the height of the crisis, there was a terrifying $600 billion in leveraged loans outstanding. This junk-rated debt looked highly likely to default, because it couldn't be refinanced: Just $77 billion of such loans were issued in 2009.

  • Here, the deleveraging never really happened, and now we're seeing record issuance (an annualized $666 billion, year-to-date) and record debt levels, too ($1.1 trillion, at last count).
Data: LCD, S&P Global Market Intelligence; Chart: Andrew Witherspoon/Axios

Most of this debt lives in CLOs (collateralized loan obligations), where it doesn't pose a huge systemic risk. It would be much more dangerous if it was being held on banks' balance sheets. But there could be hundreds of billions of dollars in losses if a stock-market correction causes the leveraged-loan window to close.

  • The big picture: To put these numbers in perspective, total subprime mortgage originations peaked in 2006 at just over $600 billion.

What's next

The saga of Iraq's debts

When the U.S. invaded Iraq in 2003, it was taking control of the most indebted nation in the world.

Why it matters: Iraq's debt at the time was an astonishing $130 billion, and the eradication of that debt was a rare example of international unity and cooperation in the interests of a debtor country.

Go deeperArrowJan 2, 2020 - World

The generational confidence gap

November's consumer confidence report showed the largest gap between the confidence of consumers under 35 and those over 55 in the history of the Conference Board's report.

The state of play: Younger people have typically had higher confidence scores, but that has changed in recent years, the data show.

World Bank cuts growth forecast for fourth time in a row

Photo: Win McNamee/Getty Images

The World Bank cut its global growth forecast for the fourth straight time on Wednesday, reducing expectations by 0.2 percentage points each year for 2019, 2020 and 2021.

"Global economic growth is forecast to edge up to 2.5% in 2020 as investment and trade gradually recover from last year’s significant weakness but downward risks persist. ... U.S. growth is forecast to slow to 1.8% this year, reflecting the negative impact of earlier tariff increases and elevated uncertainty."
— World Bank statement on its Global Economic Prospects report