The writer is chairman of Fulcrum Asset Management
Early in the Covid-19 pandemic, it became clear that the global economy would require a massive extension of public and private debt to avoid an extraordinarily deep and persistent depression.
Because this unprecedented explosion in debt provided a “bridge” over the collapse in world output, corporate bankruptcies and economic hardship for households have been significantly mitigated.
In light of the progress on vaccines, investors can be more confident that the end of the debt bridge is in sight. Nevertheless, this year’s surge in borrowing has been called the largest wave in a great “debt tsunami”.
The Institute of International Finance recently reported that the ratio of global debt to gross domestic product will rise from 320 per cent in 2019 to a record 365 per cent in 2020. The IIF concludes starkly: “more debt, more trouble”. Financial markets have ignored these warnings. Global equities have…
