Trend #2: De-leveraging
What cheap credit and irrational exuberance giveth, tighter lending controls and uncertainty taketh away. Growth is slowing down and institutions and individuals will get rid of as much debt as fast as they can. The last decade saw an unprecedented level of spending, most of it driven by cheap money and the attitude that what went up no longer went down. The impact of financial deregulation and innovation also meant that people were offered new ways to owe more money to more people.
None of this is necessarily a problem if you have a job, but if you don’t things can turn very nasty very quickly indeed.
Organizations will reduce their dependency on debt. This means that they will sell assets although by so doing they will inadvertently push the value of these assets even lower. For individuals selling assets is more problematic because their largest asset is generally their home. Hence the only real strategy is to spend less by cutting back on non-essentials. This means buying less, fixing things rather than throwing them away and possibly renting things rather than buying them outright.
In terms of business, expect to see more consolidation with markets becoming more polarised between the very large and the very small. In the public sector, expect to see government debt soar, resulting in a variety of u-turns over spending pledges in areas such as climate change, education, health and transport.