The stabilisation of global debt

Invesco
By August 12, 2018 01:02

The stabilisation of global debt

Uncommon truths

The global debt burden fell in 2017, with notable declines in some European countries (it was stable in China). Emerging market (EM) countries have less debt but offer higher real yields. We continue to believe EM debt offers good potential returns. Does debt really matter? If one person’s liability is another person’s asset, then net global debt is zero. To illustrate the point, consider the story of the tourist who arrives on a debt-ridden island. She makes a $50 down-payment for a hotel room. The hotelier quickly uses the $50 to pay off her debt to the baker, who then runs to the miller and gives him the $50 he has owed for ages and the miller takes it to the pub landlord to settle his bar bill. This enables the landlord to pay back the $50 he had borrowed from his sister, the hotelier. This happens just in time for the tourist to come back to the hotel, cancel her room and take her $50 away with her. Though nothing has changed on the island the debt burden has been eliminated. 

Invesco
By August 12, 2018 01:02

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