There is No Exit

By Heisenberg

What happens when the global credit impulse dries up?

Earlier today, I brought you a couple of visuals from the latest presentation by Citi’s Matt King who, like his colleague Hans Lorenzen, is pretty damn good at creating aesthetically pleasing charts that demonstrate how truly surreal markets have become in the post crisis era.

In a nutshell, King’s most recent visual tour of a world gone mad raises the following question: what happens when the global credit impulse dries up?

With inflation de-linked from credit (i.e. structural disinflation)…

CreditInflation

… central banks have thrown caution to the wind (i.e. ceased caring about runaway credit creation)…

CreditGDP

… with asset price inflation as the “obvious consequence”:

Debt

But what happens when the private credit impulse rolls over…

Impulse

…at the same time the central bank credit creation machine shifts into a lower gear…

CBCreditCreation

…thus forcing the market to absorb supply that was previously onboarded by the ECB, the Fed, the BoJ, the SNB, and the BoE?…

Netissue

Well, likely nothing good, and in the end, with investors prone to rush for the exits when central banks pull back, the inescapable conclusion is: “Welcome to Japan”…

In

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