Supercycle of Debt

Time-Traveling Money

Debt Be Not Proud

Not an Accident

Highly Leveraged Future

Dallas and Eavesdropping on Millionaires

We have been looking at big historical/economic/political cycles for the past two months. We reviewed Neil Howe’s Fourth Turning concept, then George Friedman’s twin US institutional and socioeconomic cycles, then Peter Turchin’s “cliodynamics” concept, and then Ray Dalio’s Big Cycle.

None of these theories exclude the others. It is quite possible they are describing the same events through different lenses. In any case, they help us understand the times we live in. They are neither predictive nor prescriptive, but descriptive. They look back through history and try to interpret the past to help us understand what might happen in the future. I think all are at least partially correct. That’s disturbing… because in various ways, each points to serious global problems in the next few years.

Today we’ll start wrapping up the series by discussing the Debt Supercycle. I think we’ll probably need a few weeks, but this is important. I don’t want to rush through it.

Time-Traveling Money

Debt has a defined sequence: The lender and borrower agree on terms, the loan is funded, the borrower repays according to a schedule, eventually pays the full amount, then it’s over. Often the parties move on to more such deals, then others, then others… in an almost (dare I say it?) cyclical fashion.

As I’ve said many times, debt isn’t inherently bad. It’s an efficient way to finance new productive capacity. This helps the economy grow and raises living standards for everyone. But debt is also easily misused, and that’s where it causes trouble. In fact, we have seen throughout history where debt has been used far more than was prudent, especially by governments, and you get a debt crisis for an individual company or country.