This report is very scary. It points out that global debt now amounts to 3.5 times global GDP. This is an insane amount of debt, in a world which has aready seen ‘peak child’ and in which productivity growth has almost ground to a halt.

Japan, as always, is the outlier. Even now, three decades after the Japanese stockmarket imploded, the debt load of Japanese corporates is gigantic. Well, gigantic, except in comparison to the debt load of the Japanese government.

The growth in debt, of corporates and households and governments, has been the constant background to my adult lifetime. The actions of central banks to suppress the natural rate of interest has kicked the can many tens of miles further down the road than seemed remotely possible in 1992 when the BoJ decided reflate the Japanese economy with lots of zero interest debt.

Governments benefit by suppressing interest rates, and as an intended side-effect, so do corporates. OK, maybe it was unintended at first, but it surely is not now.

The S&P Global report envisages mature markets reaching a ‘permanently high plateau’ where somehow debtors will coast along servicing debt at 4.1 times their aggregate annual income. If I didn’t know that debtors have been servicing debt nearly as high for a decade, I would have said that this was utterly impossible.

Of course, events like the pandemic, the global financial crisis, the war in Ukraine, the spiking of oil prices, all ‘one off’, justify each jump in borrowing, just to tide the country until events stop happening. But as MacMillan feared, the do just keep coming.

Can an investor take advantage of this? Well, theoretically, shorting JGBs would do the trick, but that’s not known as ‘widowmaker trade’ for nothing. Trying to outbid an opponent who can literally print money is probably not the smartest strategy. Alternatively, it might be worth going long Japanese banks (e.g. the Topix banks index). Those zombies might just get new life breathed into them if the Yen yield curve stops being inverted.