Leveraged developed countries beginning to crack?
(Published 27 Oct 23)
The charts in this report highlight that credit metrics in 5 countries with highly leveraged private sectors have been crushed and how the currencies and equity indices of these countries have broken key support levels that opens them up to important devaluations.
The central banks of these countries have ignored Asset Price Inflation (API) over the last 20 years, focusing solely on Consumer Price Inflation, resulting in over loose monetary policy and large increases in private sector indebtedness.
Because they continue to focus on CPI (rather than credit metrics), these Central banks are likely to keep monetary policy tight for a long period of time, which will impact their already poor performing economies. Equity and currency devaluations are a natural consequence of their actions.