"Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one."
-Charles Mackay
TL;DR Summary
For 40 years, the global economy ran on three mutually reinforcing conditions: cheap capital, open trade, and abundant energy. All three are ending simultaneously — in the same five-year window. That has never happened before in the modern financial era.
The debt supercycle is unwinding into a permanently higher rate environment. OECD (i.e., rich countries) sovereign bond issuance hit a record $17 trillion in 2025, projected to rise to $18 trillion in 2026. U.S. interest payments surpassed defense spending in 2024 for the first time since the late 1920s and are projected to reach $2.1 trillion by 2036. The full impact of the upward rate reset that began in 2022 has not yet flowed through — 45% of OECD sovereign debt matures by 2027.
The globalization cycle is reversing from efficiency-driven to risk-driven capital allocation. 81% of CEOs and COOs surveyed by Bain in 2024 had plans to bring supply chains closer to home, up 18 points from 2022. Only 2% have completed those plans. The cost inflation from reshoring is still mostly ahead of us, not behind us.
