Debt was used to buy assets, which rose in price and then burst. He points to Black Monday in 1987, when global financial markets crashed and the Dow Jones industrial average fell more than 20 percent. Those same factors, he says, led to the dot-com bubble of the 1990s and the more recent housing bubble. When bubbles burst, central banks stepped in and cut interest rates to keep the system afloat.
“The result of all that was that it was kind of a one-way bet for speculators: Keep borrowing money to keep buying assets; central banks will always bail you out,” Coggan says. “And that’s why we ended up in this mess that we are in … with lots of debts and central banks creating money to try and prop the whole system up.”
