Money Talks: The great debt hangover
Money Talks from The Economist
The Economist
4.4 • 1.2K Ratings
🗓️ 1 June 2023
⏱️ 37 minutes
🧾️ Download transcript
Summary
Decades of cheap money has left businesses in America and Europe addicted to debt. Some companies have been borrowing cash just to dole it out to shareholders. But with interest rates now reaching levels not seen in 15 years, those debt-drunk firms are waking up to the threat of a mighty hangover.
On this week’s podcast, hosts Tom Lee-Devlin and Alice Fulwood ask if those firms can kick their debt habit. Goldman Sachs’ chief credit strategist, Lotfi Karoui, explains how companies became hooked in the first place—and what will happen when they start cutting back. And Torsten Slok from Apollo, one of the world’s largest private capital managers, tells them why the cost of borrowing isn’t likely to fall any time soon.
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Transcript
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| 0:00.0 | As Nigel opened his Amazon parcel, it was in love at first sight. |
| 0:04.5 | Sleek design and effortless cornering. |
| 0:07.2 | This vacuum cleaner screamed quality and for a price lower than he ever dreamed. |
| 0:11.8 | Five stars from Nigel. |
| 0:15.0 | With star reviews from you and star prices from us, |
| 0:18.2 | start your search on Amazon today. |
| 0:21.0 | We are the largest most comprehensive medical group in the country |
| 0:31.0 | that focuses on delivering high quality care to those who need it most. |
| 0:37.0 | On May 14th, Envision Healthcare, an American company that provides doctors |
| 0:43.0 | to hospitals to cloud bankruptcy. |
| 0:47.0 | That company says it was heard by a national shortage of clinicians |
| 0:50.0 | and cited the impact of inflation on its business. |
| 0:53.0 | While the company blamed wider challenges in the healthcare sector, |
| 0:57.0 | a major factor in its collapse was the mountain of debt |
| 1:00.0 | that had been added to its balance sheet when it was taken over by KKR, |
| 1:04.0 | a private equity firm, in 2018. |
| 1:08.0 | Over the past two decades, companies in America and Europe have been on a debt binge, |
| 1:14.0 | using cheap credit to fund not just investments, but record shareholder payouts. |
| 1:19.0 | The corporate bond market really benefited the last couple of years |
| 1:23.0 | from this low rate environment got very comfortable with issuing a lot of debt. |
| 1:29.0 | Since 2000, the stock of non-financial corporate debt across America and Europe |
| 1:35.0 | has grown from $13 trillion to $38 trillion, rising from 68% to 90% of GDP. |
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