Summary of “Welcome to the buyback economy”

The cash-outs are helping to drive debt – corporate debt – to record levels.
The most significant and troubling aspect of this buyback boom is that despite record corporate profits and cash flow, at least a third of the shares are being repurchased with borrowed money, bringing the corporate debt to an all-time high, not only in an absolute sense but also in relation to profits, assets and the overall size of the economy.
What concerns these regulators is not simply the growth of the corporate debt market but also the change in its structure and how it will perform during a sell-off.
For the bigger reality is that the global economy is now awash in debt – not just corporate debt but also record amounts of government debt, household debt and investor debt – at a time when interest rates are rising from historically low levels.
Not only does the new debt need to be financed, but trillions of dollars in old debt will also need to be refinanced when it comes due.
Memories are short, and a decade later, mortgage debt, credit card debt, student loan debt, and car loan debt are all, once again, at record levels and growing briskly.
Finally, there is the debt that investors large and small take on to buy stocks, bonds, derivatives and other securities.
“Banks will reap what they have sowed in having created all this debt,” said James Millstein, an expert in corporate and government debt who oversaw the restructuring of insurance giant AIG for the treasury during the 2008 financial crisis.

The orginal article.