How Long Until We Get There?
"There" is the right level of Debt to GDP. Unfortunately, we don't know what the right level is nor how long the deleveraging process will take to get us there.
The Early Warning blog takes a shot at estimating how long it will take in the post below.
I don't know if 15-20 years is the right answer and quite frankly, I hope it's not. I think the process will take 5-7 years and the level won't go down very far. But I do agree that the muddle-through economic outlook is probably the best bet. And one thing that really caught my eye was the chart that shows lots of countries are trying to deleverage at the same time. That could introduce a fallacy of composition problem and make the roller coaster ride a little bumpier along the way.
I still believe the future of the stock market is more likely volatility than sustained ups or downs. So my thinking is to be prepared with all of the stocks I want to buy and decent estimates of value. That way I can take advantage of the volatility and strike while the iron is hot.
Please share your thoughts about where you think debt to GDP is likely to go and how long it takes to get there.