![]() Sven Smit: Many people often just look at the profit-and-loss statement when looking at the aggregate economy. They actually don’t look at the balance sheet, but the balance sheet has very profound implications. You could have large mismatches between the debt that was used to finance assets and the value of what you purchased with that financing-for example, real estate, equipment, etcetera. The value of that equipment could go down, but the debt may need to be paid at higher interest rates. Looking at the world’s future that way is very important because we are living in a time of higher interest rates and higher inflation. So we want to pay attention to the balance sheet because that’s where the stock value sits. ![]() The world’s GDP sits at about $100 trillion, but the world’s balance sheet is worth north of $500 trillion. Therefore, if the stock moves around 20 percent, that’s equivalent to the same amount as the global GDP.Ī small variation on the balance sheet would turn out to be a large variation in the real economy. That stock value is people’s wealth, businesses’ wealth, and influences their sense of whether they can continue to spend. A lot of the analysis focuses on the United States-why is that? And are these findings applicable globally? In this sense, real estate can reflect people’s wealth. ![]() Sven Smit: The findings are absolutely applicable globally. ![]() That said, the United States in general has more data. It’s also a large market and more uniform. ![]()
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