Recently, I banged out The Next Economic Disaster by local hero / entrepreneur / investor, Richard Vague. Beach reading at its finest, right?
A fast, interesting and scary read from an economist’s POV discussing the leading indicators that can predict economic crisis and, in some cases, collapse.
The basic premise is that ballooning private debt growth measured top down at 18% or more annually for 5+ years and an absolute private debt total which eclipses 150% of total GDP is a recipe for nearly guaranteed economic crisis in some form.
One interesting takeaway was a comparative look at 1929, 1987 and 2008 in the US along with 1990s Japan and Europe’s more recent issues. The status of China’s current lending-fueled urban overcapacity and its potential future economic implications are also discussed.
Another item of note is an alternative proposal regarding the 2008 US governmental bailout of the banking system. The proposed approach does not reward the lender for their imprudence, as was the recent case, but it does afford at-risk institutions more time to write off or restructure their debt and provide a more graceful economic landing for all parties – well, unless the at-risk bank actually became insolvent and had to be taken over by the government, wiping out their shareholders and bondholders, of course. Ouch.
I’m not an economist or even a finance guy, but my nerd side loved it, including all the foreboding.