11 Charts Show The World Has Learned Nothing From Global Financial Crisis

by | Apr 4, 2019 | Headline News | 18 comments

Do you LOVE America?


    This article was originally published by Tyler Durden at Zero Hedge

    After the 2008 crisis forcefully shoved the faces of most countries directly into the mess they had created, most major global economic participants arrived at the obvious conclusion that since debt caused the crisis to begin with, a deleveraging was necessary in coming years.

    But instead, just the opposite has happened, according to Bloomberg: central banking cowardice and flawed monetary policy have, over the last decade, dug the world deeper into the hole it was in prior to the crisis. In the U.S., for instance, debt has shifted between industries, but it has not gone away. China, once relatively responsible in its debt positioning, has now emerged as the newest bastion for taking on debt to encourage growth.

    Here’s a graphic representation of debt in 2007:

    And where we stood in 2018:

    It was well known in Wall Street circles that there was simply too much leverage prior to the 2008 crisis. Bankers would reportedly compare U.S. household debt to GDP against the personal saving rate, which painted a clear picture of the chaos that would be coming. Here’s how those numbers stacked up during 2008, versus where they are today:

    Heading into the financial crisis, consumers were overlevered as low rates allowed them access to cheap credit – sound familiar? At the same time, European banks were suffering meaningful losses.

    Of course, nobody likes a deleveraging, no matter how absolutely necessary it is: it’s uncomfortable, generally results in underconsumption and it leads to collapsing economic growth. So instead of dealing with that discomfort, post-crisis, central banks just cut rates leading to even more leverage. In addition, the world discovered a new “borrower of last resort” in China, whose debt has skyrocketed over the last decade, putting it alongside of the U.S. as leaders in global debt.

    By 2008, household debt accounted for 98% of U.S. GDP. While spending excesses have been reined in to some degree, the country is seeing new types of debt come to prominence. Auto loans and student loans, for instance, have doubled since the crisis, moving from $1.36 trillion to $2.73 trillion.

    The news isn’t all terrible. If you’re a perma-bull (or you work for the New York Fed) and are looking for one metric to hang your hat on, you could note that housing debt is lower than it was ten years ago, and Helocs have declined sharply. And as banks have offered more credit to card holders, balances haven’t been rising in concert – yet.

    And (for now) banks seem to be on better footing. After the crisis, banks in the U.S. deleveraged as the government stepped in to rescue them. Since being re-regulated, they have used low rates to put their financial houses back in order. It’s amazing how trillions of dollars in freshly printed bailout money and low rates can really shore up a bank’s debt to equity ratio. 

    Banks in Europe have also started to deleverage. Germany has seen its banking assets go from 3x its GDP to about 2x its GDP now. And many of the big banks in Europe are too large for their respective governments to ever step in and rescue them, should the situation again warrant it. Banks in the euro zone over the last decade have cut back their assets by an amount equivalent to the region’s entire GDP.

    Non-bank corporations were less leveraged entering the 2008 crisis than they were at the beginning of the decade. Since then, new debt has outpaced the free cash that these companies have been generating – especially companies that make up the Russell 2000 index. This could suggest further vulnerabilities going forward.

    Perhaps the most frightening detail is that companies rated BBB+, BBB, or BBB- (the three lowest grades before they would hit “junk” status and be faced with higher interest payments) now outnumber companies with some level of debt rated A. Companies appear to be purposely toeing the line between BBB- and junk, trying to take on as much debt as possible before getting downgraded. From the below chart, you can see how it looks like companies are “pushing it”:

    But nothing in the U.S. could compare to the obscene amount of debt China has taken on in the last decade to fund its own growth and stave off recession. Prior to the crisis, the country had financed its growth without abusing debt. Household debt in 2008 was equal to 18.8% of China’s GDP. That number is now 51%. China’s total debt has increased about 700% since the crisis and it accounts for 70% of new debt taken on anywhere in the world since the crisis. 

    The debt splurge has reluctantly kept the wheels of China’s economy grinding. It has also kept demand for Western products robust. Without this demand, Western banks and consumers may not have been able to deleverage as much as they have. However, China’s debt is doing little to prevent the country’s now-dwindling growth in output.

    And of course, the Chinese want to deleverage, but they also don’t want growth to drop under 6% per year. Every time the country goes to regulate banks and lending, growth falls, and the country capitulates to keep its growth number elevated.

    The country’s aspirations to be the best at something worldwide have finally come to fruition: China has now replaced the U.S. as the “source of greatest anxiety over debt.”

    We can’t wait to see how it all comes crashing down next time.


    It Took 22 Years to Get to This Point

    Gold has been the right asset with which to save your funds in this millennium that began 23 years ago.

    Free Exclusive Report
    The inevitable Breakout – The two w’s

      Related Articles


      Join the conversation!

      It’s 100% free and your personal information will never be sold or shared online.


      1. I see South Africa shows up on the debt chart but not Rothschilds’ Land, Israel. Not surprising. Why would the head banker, Rothschild, need to borrow from himself. Besides getting our tax dollars as financial aid, College there is free. No student loan debt.


        • If that comment was meant to be coherent to anyone other than yourself, you failed.

      2. If you owe $750 on your car and can’t make the payments, they will repossess your car. If you own $1.5 trillion,they will work with you to see that you don’t default. Is there any sanity left in the world?

        • Actually, that makes perfect sense. There is an old saying: If you owe the bank a little money you have a problem. If you owe the bank a lot of money the bank has a problem. That’s about as sane as it gets.

      3. China has several issues. Massive debt is one problem. Nice to see this topic being discussed in a forum like this.

        The second big problem that China will face is a demographic cliff after 50 years of one-child policy. That policy resulted in too many boys and not enough girls. It also means that there will be far too many old people and not enough young people to replace them. I find this very amusing. It is the law of unintended consequences that goverments always fail to understand. Good luck trying to get people indoctrinated to only have one child to think that having three or four is a good thing!

        I think the era of large governments will come to an end. Not viable over the long term. People are fallible and corruption is easy on a large scale. Harder to do that kind of corruption with people in your local area.

        • They need LESS people not MORE! So it is going to work out better in the end. Making them a lot more viable in the long run. They need to do the same shit in other places too.

          • Life is the cheapest commodity in china. So many fookin people they are considered less than animals. Unwanted, un needed, unwelcome. Here take some of these thrown out eaters into YOUR house huh?


        • The UN needs a new home for all those poor economic migrant hordes from the Islamic world and the dark continent.

          • Give them all to the anti-abortion pro population people. They will be happy to house and feed and pay for them! Oh wait… they want the govt. to extort currency from all of us to pay for it. True hypocrites of the highest order! They just can’t seem to make earth an overpopulated living HELL fast enough I guess.

              • I own this movie. I love this movie. This movie is so true…..more like a documentary today.

            • the people who had them should take responsibility for them, you idiot

      4. Take white women’s voting rights away and disband divorce courts and everything returns to normal. Otherwise, say goodby USA. You Tube white men going through divorce court by typing in “divorce rape”. Each state has a child support calculator for kids. The min is $1800 in child support for 1 child when she decides “she’s not happy”. $21,600 PER KID or go to prison. Good deal guys?

      5. The trouble is quality folks tend to have very few children. The lowlife culls tend to have litters. often a woman will have a large number of offspring and they all have different fathers. I knew a guy that owed large amounts of money. He told me he wasn’t worried about the money he owed. He was worried that he wouldn’t be able to borrow more. Debt for lots of folks is fine and dandy right up until the moment that the Bank calls your Note. My great grandfather never dealt with banks. Never wrote or accepted a check. He was fond of saying (If borrowing money at interest is such a good deal? Why is the 3ew banker the richest man in town?) When he died in the 1950,s he had no debt, had paid for land. and over $5000 cash saved in a coffee can.

      6. In every global economic crisis there are people who profit. Those are the people that have learned, and those are the people making sure we have another global economic crisis. They will profit by taking your land, your house, your car and your money.

        • They will profit by taking your land, your house, your car and your money. Only one thing you didn’t mention? Whenever you buy on credit its not Your stuff. Until the very last payment is made its not yours . Until the item is paid for in full you are nothing more than a glorified renter. You make a debt you should pay it. If you fail to complete your part of agreement you should not benefit.

          • I agree with you, the debtors lose nothing, the owners are at risk, as they will figure out a way to take what you worked for and own, whether through higher taxes or
            planned inflation (quantitative easing), all in the name of saving the nation and economic equality. And they will take it, at gunpoint if necessary.

      Commenting Policy:

      Some comments on this web site are automatically moderated through our Spam protection systems. Please be patient if your comment isn’t immediately available. We’re not trying to censor you, the system just wants to make sure you’re not a robot posting random spam.

      This website thrives because of its community. While we support lively debates and understand that people get excited, frustrated or angry at times, we ask that the conversation remain civil. Racism, to include any religious affiliation, will not be tolerated on this site, including the disparagement of people in the comments section.