You are right I am sorry. My replies have been in annoyance. Several times these past few months my posts have been replied with low-effort "gotchas" and I am a bit low on low on patience for the nerd-sniping.
Let me apologize for my comments, I should have paid more attention to both the article and your comment.
Now I see that we basically agree about the numbers, we just have a different opinion on the fact.
They were not made in ill will, I was just trying to make a discussion. I agree that I could have toned it down on the loaded questions, I was a bit undercaffeinated this morning.
I happily accept your apology. Thank you for trying to open a discussion with me, I live talking about economics and finance.
Let's start fresh and get to that discussion we both want. No problem of course if you disagree with me.
To open the discussion my opinion is that this article is overstating the case for concern in corporate debt. The growth since 2000 is not significantly above a trend line which one might expect in a loow interest rate environment.
For my part I did sell most of my stocks in the past few months and moved my families money into a form of real estate like real asset. I do think the markets are bubbly but journalists have been trying to pin a possible catalyst for a popping of said bubble.
Corporate debt I argue would not be that cause. In fact one of the common complaints of the clo market is how junk bond issuing companies are able to reduce the number of covinents. This is both a testament to the strength of demand, but would also make it harder for the market to price correct, aka pop.
I will offer up that the most likely cause of any popping would logically be China. Yet of course China's strong capital controls allow them great freedom in issuing stimulus without tanking trade balance.
Let me start off by saying that I'm not an expert in finance, but I'm sure you've already noticed that.
The corner I'm coming from is the debt doubling. I know you mentioned GDP doubling as well, but I would be more surprised if the GDP hadn't double with growing debt.
What seems alarming to me is the constant pace at which the debt is growing with no attempts to reverse it at all.
What is your take on my humble observation ? Do you think that the debt not even touching the 5T mark after the 2009 crisis is healthy ?
So there 3 major categories of debt when talking about a nation:
1. Household
2. Corporate
3. Government
Each country has a slightly different mix between these 3. Keynesian economics (which is pretty old stuff) explains why all these 3 tend to sum to a number similar between nations.
In other words, if one country has a lot of government debt there is a tendency for said country to have less household and corporate debt. This is the case in Japan where the government debt is at over 200% of GDP, but household and corporate debt is super low.
In the great recession in America household debt declined a good bit. Corporate debt declined a little. And government debt went up a lot.
With interest rates so low, near 0% or lower in inflation adjusted terms, holding debt is a "good thing" provided said debt is funding profitable investments. Thus you do not want households growing their debt, since they spend the money. Nor do you want government debt to increase except as a stimulus. Meanwhile corporate debt represents businesses making capital funding decisions.
What has happened with ultra low rates is business are financing themselves by borrowing instead of issuing equity.
Share buy backs are a big news, but more risky is leveraged buyouts. In either case it is hard to see how these borrowings are "wise investments". To the extent increased corporate borrowing is going to buybacks or LBOs, maybe those are mis-investments. I might call them simple "capital chasing rent seeking", which also occurs when real estate prices go up.
Altogether corporate debt is the nicest form of debt you'll find in an economic mix. China is mostly government debt, with rising household debt and under performing corporate debt. If America's corporate debt is going to offset equity issuing while the balance books remain solid, that is different beast versus China's situation.
Which leads me to the more interesting topic: the reduction in the natural rate of return on capital. GDP growth is driven by techonolical progress. Yet our recent tech progress has been in non-capital intensive indsutries. Software does not truly require lots of money. In the past, for example railroads, a good business plan was less about "can this work" than "This is how we shall bridge the risks building out this clearly attractive business".
Steel mills. Oil wells. Factories. Tooling for said factories. All capital intensive. Instead today's big investments are things like-driving up property prices, or leveraged company buyouts. Things where capital is "competing" for an otherwise zero-sum flow of cash.
All this I bring back to my own personal financial investing. Zero-sum competitions are boring and often leave the competitors poorer for their efforts. As such I want to find in my own local country chances to invest my time and money into value creation. In our case that means building a video game (my profession), and building a mid-scale solar power-plant (50KW).
