The Rabid Capitalist

Professor Glenn A. Okun

Although it is old news to subscribers to the Rabid Capitalist (see https://therabidcapitalist.com/2023/08/03/another-looming-debt-crisis-and-an-investment-opportunity/), on Friday, Mohamed El-Erian, who is an economist, the President of Queens’ College, Cambridge, and chief economic adviser at Allianz, warned on Bloomberg Television that corporate and commercial real estate borrowers will be hurt by higher interest rates when they have to refinance next year.

He commented that refinancings will become disorderly at some point next year under the current debt market conditions. 

Consumers will not face refinancing risk in the near term due to the lengthy maturities of home mortgages.  However, other consumer credit markets are not insulated from the rate environment.  Delinquency rates on credit cards are rising.

A prolonged period of elevated interest rates will exacerbate the debt crisis.