Abstract: Executives of the world are evenly split on the question as to
whether the global recovery will build or lapse into another recession.The article concludes that the credit markets can provide a concise
indicator that a recession is on the horizon.
The article’s conclusion is that
economists with the tenacity and the willingness to take time to study the
relationship between financial transactions and real economies can easily see
the signs of an oncoming downturn and avoid getting caught up in credit market
hazard. An example of this was the increasing collateralization of debt
obligations during the great credit crisis even when these financial
transactions were not creating real economic value. This is believed to have resulted
demise of Lehman Brothers two years ago.
Published: McKinsey Quarterly, October 2010
Authors: Tim Koller
Link: Better Way to Anticipate Downturn