The problem of debt

In the latest episode of the New Money Review podcast I’m delighted to welcome Satyajit Das, a former investment banker, derivatives expert and author.His book “Traders, Guns and Money”, published in 2006, remains one of the best books ever written about the world of high finance.It’s been called “a wickedly comic exposé of the culture, games and pure deceptions played out every day in trading rooms around the world. And played out with other people’s money.”Das went on to publish “Extreme Money” and “The Age of Stagnation”, in which a common theme is the high global levels of debt.In the podcast, Das talks in detail about debt and the complexities of measuring it. He says all financial markets are now at risk from excessive leverage. Japan, whose currency has recently undergone a big devaluation, may point the way ahead for all of us, he says.We discuss:Why debt is like heroinHow the marginal productivity of debt has been fallingReaching the “trust moment” in government bond marketsHow vulnerable are US Treasuries to a liquidity crisis?Why inflation may be higher for longer……and interest rates could overshoot expectationsDebt on debt and the challenge of understanding leverageHow tech entrepreneurs borrow against equityComplexities in leverage chains—the example of GreensillWhy non-bank financing of debt is particularly riskyWhy regulators struggle to monitor shadow banksCross-border exposures in the Evergrande bankruptcyWhy the “usual disinfectants”—better disclosure and more capital—no longer workHow Japan finally escaped its debt trapWhy sovereign wealth funds are buying up global infrastructureThe end of financial engineering