Most Americans, and people across the planet, have been trained by a financial system where borrowing costs became perpetually cheaper. If you got into a pinch, you could refinance your mortgage, with more agreeable terms, and quickly increase your cash flow.

You could also pull out some equity and upgrade your kitchen, pay off your credit cards, take a vacation, or play in the stock market. What a delight.

If you took out a mortgage, expanded a business, or looked at a government balance sheet anytime between the Reagan administration and the dawn of the 2020s, the wind was firmly at your back. Biting off more than you could chew was often rewarded.

But credit cycles operate in massive, multi-decade tides. Their movements are broad and sweeping. And right now, after four decades, the tide is rushing out. The tranquil waters of easy liquidity have turned into a harsh and turbulent macroeconomic sea.

Perhaps you’ve noticed your credit card rates creeping up. Or you’ve looked into a car loan to finance a new vehicle purchase. If so, you’ve seen the painful reality of higher borrowing costs. At the same time, your bond portfolio’s taken a hit. Losses in what was supposed to be the safest corner of your nest egg were not supposed to happen. Continue reading →