Part 4/9:
Deleveraging and Crisis: The culmination of high-leverage environments leads to defaults and bankruptcies, forcing the economy into a contraction phase. This is typically marked by substantial market corrections, which can wreak havoc across sectors.
Reform and Recovery: Following the crises, governments may initiate reforms, debt forgiveness, and liquidity injections aimed at stabilizing the financial system, thereby setting the stage for the next cycle.
Cycle Restart: Once the recovery phase is firmly underway, the economy begins to receive policies conducive to borrowing and lending, fueling another cycle of growth.