Excessive Debt Accumulation Level

An Excessive Debt Accumulation Level is a debt accumulation level (of debt accumulation) that is not a long-run sustainable level,

• Context:
  • It can range from being a Excessive Macro-Debt Accumulation to being an Excessive Micro-Debt Accumulation.
  • …
• Example(s):
  • excessive national debt.
  • excessive bank debt.
  • excessive corporate debt.
  • excessive consumer debt.
  • excessive household debt.
• See: Financial Crisis, Financial Risk.

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References

2009

• (Reinhart & Rogoff, 2009) ⇒ Carmen M Reinhart, and Kenneth Rogoff. (2009). “This Time is Different: Eight Centuries of Financial Folly." Princeton University Press. ISBN 0691142165
  • QUOTE: If there is one common theme to the vast range of crises we consider in this book, it is that excessive debt accumulation, whether it be by the government, banks, corporations, or consumers, often poses greater systemic risks than it seems during a boom. Infusions of cash can make a government look like it is providing greater growth to its economy than it really is. Private sector borrowing binges can inflate housing and stock prices far beyond their long-run sustainable levels, and make banks seem more stable and profitable than they really are. Such large-scale debt buildups pose risks because they make an economy vulnerable to crises of confidence, particularly when debt is short term and needs to be constantly refinanced. Debt-fueled booms all too often provide false affirmation of a government’s policies, a financial institution’s ability to make outsized profits, or a country’s standard of living. Most of these booms end badly. Of course, debt instruments are crucial to all economies, ancient and modern, but balancing the risk and opportunities of debt is always a challenge, a challenge policy makers, investors, and ordinary citizens must never forget.

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