The COVID-19 pandemic appears to have all the hallmark of one great, orderly and synchronised global consumer deleveraging. This deleveraging has been spurred on by falls in consumption amid economy-wide lockdowns. Swift and sizeable government interventions have been the other essential ingredient as these policies have averted both corporate and consumer defaults and, therefore, reduced the risk of another financial crisis. This deleveraging is unlikely to last in the face of abundant liquidity and cheap credit. Any reversal is likely to add further momentum towards a V-shaped recovery.
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