Bond Market, Not Banks, Dominates a World of Looser Lending
Even strong believers in free markets worry that they’re distorting judgments and misdirecting credit.
The way lending decisions are made has changed utterly in the last 50 years.
Illustration: Jack Hughes for Bloomberg Markets
Credit is a big deal. Over the past decades it’s inexorably risen as a share of the global economy, fueled by credit markets that have steadily displaced the role of banks. That growth has often been too rapid, and flaws in credit markets sparked a global seizure in the 2008 financial crisis. And yet even that proved little more than a road bump in the rise of credit.
According to the International Monetary Fund, global public debt has tripled since the mid-1970s to reach 92% of the world’s combined gross domestic product (more than $91 trillion) by the end of 2022. Since 1960, private debt has tripled to 146% of GDP (or close to $144 trillion).