Deleveraging. More to Come.

Here’s an interesting commentary on a deleveraging study done by the McKinsey Global Institute.  Here is a link to the McKinsey site that gives a good synopsis.  MGI analyzed 45 historic episodes of deleveraging in which an economy significantly reduced its total debt-to-GDP ratio, that have occurred since 1930 and notes that: “Empirically, a long period of deleveraging nearly always follows a major financial crisis;” and “Deleveraging episodes are painful, lasting six to seven years on average and reducing the ratio of debt to GDP by 25 percent. GDP typically contracts during the first several years and then recovers.”  This is the full, 94-page report.

-Billy Ray

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