However, going forth, in a less sedate interest rate environment, managing this massive debt overhang is likely to throw up numerous challenges, with the potential for a banking doom loop a key challenge. The doom loop refers to the mutually beneficial, symbiotic relationship that exists between governments and domestic banks. What happened in Europe was a straightforward case of the banking doom loop. What once appeared to be a mutually beneficial relationship now becomes a death embrace — thus the doom loop. The banking doom loop is just one of the numerous problems that come with debt financing.

Source: The Edge Markets June 04, 2021 12:11 UTC