Report
Is there a way out of the unstable dynamics where a reduction in interest rates begets an increase in debt, which begets a further reduction in interest rates to avoid a borrower insolvency crisis?
We look at OECD countries and at the world as a whole. We are concerned that the following dynamics has taken root: central banks lower interest rates ( to well below the level of growth); this results in an increase in debt, which then forces the central banks to lower interest rates further to avoid a debt and borrower solvency crisis. We then have a divergent dynamics of rising debt ratio s and falling interest rates. To escape it, central banks probably need to have the courage to raise interest rates before the debt ratio is so high that doing so becomes impossible. It currently seems that only the United States and emerging countries other than China want to go down this path.
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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