The total amount of outstanding business debt currently stands at $51 trillion. By 2020, this figure will surge to $75 trillion, according to S&P Global Ratings.
Before investors begin panicking at the seemingly impossible figure to comprehend, CNBC noted that $75 trillion in business debt isn't a major problem if credit quality remains high, interest rates low and there are no serious economic disruptions.
If these scenarios do not favorably play out there will be a sudden tightening of the credit market that could result in new financial troubles. S&P even coined a new term, "Crexit," to describe the withdrawal of creditors from the market.
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"A worst-case scenario would be a series of major negative surprises sparking a crisis of confidence around the globe," CNBC quoted S&P as saying in the report. "These unforeseen events could quickly destabilize the market, pushing investors and lenders to exit riskier positions ('Crexit' scenario). If mishandled, this could result in credit growth collapsing as it did during the global financial crisis."
Should You Worry?
S&P also said in its report it is "inevitable" that a correction occurs in the credit market. The only unknown at this point if a correction will be a mild or severe one.
The research firm also argued that central banks across the world are stuck on the false narrative that a credit-fueled growth strategy is healthy for the global economy.
"In fact, our research highlights that monetary policy easing has thus far contributed to increased financial risk, with the growth of corporate borrowing far outpacing that of the global economy," the report added.
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