The Intelligence from The Economist Loan behold: a global-economy danger
Mar 26, 2019
In this discussion, Guy Scriven, a correspondent focusing on East Asia's methamphetamine crisis, sheds light on the alarming rise of drug use and its complex roots in Myanmar's shifting drug trade. He highlights the interplay of militia groups and the impacts on neighboring countries. The conversation also touches on the troubling global rise in corporate debt, reminiscent of past financial crises, and draws parallels to Slovakia's political transformation with an anti-corruption candidate gaining traction.
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Corporate Debt Concerns
- A concerning trend is the rising corporate debt, especially among companies with bad credit risks.
- This resembles the 2007 crisis, where bad mortgage debt shook the global economy.
Economic Strength vs. Corporate Debt
- The American economy appears strong, but corporate debt has grown significantly since 2012.
- This high level of debt could leave businesses vulnerable if the economy changes.
Risky Corporate Debt and CLOs
- About $1 trillion of corporate debt is held by weak companies, similar to the subprime mortgage debt that triggered the 2007 crisis.
- Regulators are concerned about the leveraged loan market and collateralized loan obligations (CLOs), which resemble the subprime mortgage crisis.