It really is just about as simple as Charles Hugh Smith makes it in this article. From Smith at oftwominds.com:
Once private credit rolls over in China and the U.S., the global recession will start its rapid slide down the Seneca Cliff.
Few question the importance of private credit in the global economy. When households and businesses are borrowing to expand production and buy homes, vehicles, etc., the economy expands smartly.
When private credit shrinks–that is, as businesses and households stop borrowing more and start paying down existing debt–the result is at best stagnation and at worst recession or depression.
Courtesy of Market Daily Briefing, here is The Chart of Doom, a chart of private credit in the five primary economies:
Why is this The Chart of Doom? It’s fairly obvious that private credit is contracting in Japan and the Eurozone and stagnant in the U.K.
As for the U.S.: after trillions of dollars in bank bailouts and additional liquidity, and $8 trillion in deficit spending, private credit in the U.S. managed a paltry $1.5 trillion increase in the seven years since the 2008 financial meltdown.
Compare this to the strong growth from the mid-1990s up to 2008.
This chart makes it clear that the sole prop under the global “recovery” since 2008-09 has been private credit growth in China. From $4 trillion to over $21 trillion in seven years–no wonder bubbles have been inflated globally.
To continue reading: The Chart of Doom: When Private Credit Stops Expanding…
