The Next Financial Crisis is Coming | Opinion PHILIP PILKINGTON

In March 2021, the Bank of International Settlements published a paper that received far too little attention. The authors noticed that, relative to the size of the economic downturn, too few businesses were going bankrupt. They dug into why this was, and lo and behold they found that businesses were tapping into credit markets. They were borrowing to keep the lights on. Specifically, they found that the at-risk companies were in the "airline, hotels, restaurants and leisure sectors"—all those sectors heavily impacted by the lockdowns

Examining the research and the markets, it appears that investors have a rationale of sorts for this massive increase in lending at historically low interest rates. They seem to assume that the post-COVID bounce back in the service sectors will be nothing short of magical. Yet thinking about it for even a moment suggests that this justification is nonsensical.

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The Next Financial Crisis is Coming | Opinion PHILIP PILKINGTON