In the summer of 2017, we published a piece highlighting growing concern in the auto-market; highly-levered purchases of automobiles and unsustainable lending practices. The piece was archetypal to the growing role of credit in society today, i.e. ever higher levels of debt across the board with no end to the growth in sight. The Wall Street Journal recently published a detailed article on the extent to which automobile financing has changed in the last ten years; most notably more aggressive financing options now available to consumers. Auto financing displays a principal issue of too much credit; expansive financing options can turn a well-intended push to make a good or service affordable to unaffordable, rather quickly.
Read MoreTwo major credit market events have occurred in 2019. The first was the harbinger of a recession, the dreaded 2-year to 10-year yield curve inversion in August. This was followed by a massive spike in short-term rates when the overnight repo rate shot up to 10% in late September. Many people reading this can’t or don’t remember the last time they saw a double-digit baseline interest rate. Seeing the best credit-market seize up in this manner was alarming and perplexing. This jump in overnight rates didn’t wipe-out billions of dollars of wealth but it garnered a lot of attention, and rightly so. The last financial crisis was centered principally around credit, and many crises begin as liquidity issues.
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