Earlier in the long-term debt cycle, when the amount of outstanding debt isn’t large and there is a lot of room to stimulate by lowering interest rates (and failing that, printing money and buying financial assets), there is a strong likelihood that credit growth and economic growth will be good. Later in the long-term debt cycle, when the amount of debt is large and there isn’t much room to stimulate, there is a much greater likelihood of monetary inflation accompanied by economic weakness.
