What I Learned This Week

Could Turkey default and what are the implications?

Ever since the GFC, we have repeatedly voiced concern over three key themes: 1) trying to solve a debt crisis with more debt ended badly the last time it was tried; 2) free money from central banks triggered a relentless global search for yield, causing capital to flow to borrowers at interest rates that did not adequately assess default risk; and 3) the world has become increasingly reliant on new debt to generate incremental economic growth, with global debt having increased more than $70 trillion since the financial crisis, to $247 trillion, or 318% of GDP. As history repeatedly shows, this debt burden is not a problem - until it is. We have asked many times how this debt burden will be…

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