1/ A decade after the #globalfinancialcrisis, what’s changed? And what hasn’t? We recently surveyed the state of the global financial system: mck.co/2C5vm4B Take a quick tour with us in this #thread.
2/ After the #GreatRecession, many expected a wave of deleveraging. But it never came. The combined global debt of governments, nonfinancial corporations, and households is up by $72 trillion since the end of 2007. mck.co/2C6IExS
3/ Consistent with history, a debt crisis that began in the private sector shifted to governments in the aftermath. From 2008 to mid-2017, global govt debt more than doubled. 
4/ China alone accounts for >1/3 of growth in all types of global debt since the crisis. Its total debt has increased by >5x over the past decade, going from 145% to 256% of GDP.
5/ Household debt is now down in the countries at the core of the 2008 crisis. But it’s climbed higher than pre-crisis levels in other advanced economies.
6/ Globally, nonfinancial corporate debt has more than doubled over the past decade to hit $66 trillion in mid-2017.
Two interesting departures from the past...
Two interesting departures from the past...
7/ First, 2/3 of the growth in corporate debt has come from developing countries, China (and esp. its construction/RE sector) is a big driver here.
8/ Second, while corporate lending from banks has been nearly flat since the crisis, corporate bond issuance has soared.
9/ Today banks are better capitalized and have scaled back proprietary trading & foreign claims. Most are less profitable.
11/ Since 2007, gross cross-border capital flows have fallen by half. FDI, which is long-term in nature, now a greater share. Less money moving across borders = lower risk of global contagion.
11/ Do we have to worry about another #globalfinancialcrisis? Yes and no. The world addressed many of the risks behind the 2008 meltdown, but some new ones bear watching.
12/ Growth of corp debt in developing countries poses a risk, esp. if denominated in foreign currencies. We estimate 1/4 of corporate issuers in developing markets are at risk of default today.
13/ Overall, credit quality in the corp bond market is deteriorating. A record amt coming due over next 5 years, with interest rates rising.
14/ Other risks to watch? Localized housing bubbles. China’s overextended property sector & the unsustainable finances of its local gvts.
15/ The good news is most of the world’s pockets of debt are unlikely to pose systemic risk. Problems would cause pain for investors and lenders, but probably not a 2008-style meltdown.
17/ One thing we know from history: the next crisis probably won’t look like the last one. Biggest lesson of 2008 = Be vigilant when times are still good.
