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IPFS News Link • Economy - Recession-Depression

"The 'D' Word": El-Erian Warns 'Twin Deleveraging' Could Spark A Global De

•, by Tyler Durden

Those who don't like having their assumptions questions - like, for example the 'assumption' that economic growth will come 'roaring back' after this is all over, like Mnuchin promised on Wednesday - should probably turn back now.

As many analysts have argued, a recession is looking virtually inevitable at this point as the global economy shuts down to fight the novel coronavirus.

Only a handful have dared to invoke "the 'D' word" in their projections. But their ranks include Allianz Chief Economist Mohammad El-Erian, who has warned that a depression could swiftly ensue due to the twin "economic deleveraging" and "financial deleveraging" caused by the crisis.

That is, not only is economic activity falling off a cliff, forcing many businesses around the world to temporarily close or dramatically cut back their hours, risking a string of destabilizing main street bankruptcies. But the pressure on financial markets risks creating a 'cascading' selloff in the corporate debt market as America's seriously overlevered companies finally face their reckoning.