A country is bust when the markets decide.
Our long-term investment themes
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The end of the debt super-cycle
70 years of debt accumulation has come to an end – at least in the private sector in developed markets – as capital that really should be employed productively is increasingly used to service existing debt, and that holds back productivity gains and economic growth.
The story is somewhat different in emerging markets. Debt continues to rise there almost as if 2008 never happened, with China being the main culprit. As the world’s central banks are all keen to see their currency remain competitive, there is a substantial risk that they sit on their hands when they really should take firm action.
This could potentially result in significant inflationary pressures, in particular if the country in question has a low output gap. Amongst OECD countries, the US is our no. 1 candidate to experience inflationary problems in the foreseeable future.