China’s Economic Growth Slows Sharply as Covid Policy Takes a Toll
New York TimesMAR 28 2022
The world is heading toward the mother of all stagflationary debt crises and there is little policymakers can do to prevent this from happening after years of ultra-loose fiscal, monetary, and credit policies that have encouraged debt over equity. Governments do not want to raise taxes or cut spending to reduce the deficit, and they will eventually give up fighting inflation in the wake of the looming crash.
Ultra-low interest rates, along with the aggressive tact of investors, have indeed driven leverage higher, but rising rates would only make it more dangerous because it would likely promote further instability across the global financial system. Solving this hidden debt challenge requires more transparency in the exposure of the banking system.