Consumers aren’t the only ones defaulting on their debts: Corporate bond defaults were up massively in 2023, especially for high-risk junk debt, and the trend is continuing this year at a pace not seen since the 2008 global financial crisis. Unsurprisingly, companies selling low-rated junk debt are being hit the worst.
The number of corporate debt defaults in 2023 has already exceeded the total number of defaults last year.
According to data from Moody Investment Services, 55 American-based companies defaulted on loans through the first half of 2023. That was a 53% increase over the total number of defaults in 2022.
With a debt ceiling deal done, the threat of a US government default is off the table for the time being. But a wave of corporate defaults is on the horizon according to Deutsche Bank’s annual default study.
This is the inevitable consequence of central bank monetary policy and it was entirely predictable.
For the last several years, we’ve enjoyed the fruits of an economic bubble blown up by easy money and debt. But ultimately, that debt is going to be the economy’s undoing. Simply put, these debt levels are unsustainable without runaway inflation.
So, pick your poison.
As pundits and politicians continue to speculate about economic recovery, hundreds of companies large and small are struggling under loads of debt, filing for bankruptcy and closing their doors.
In September, 54 more large companies filed for bankruptcy, according to S&P Global intelligence. A total of 509 companies have gone bankrupt this year as of Oct. 4, exceeding the number of filings during any comparable period since 2010. That was piled on top of the 54 companies that filed for bankruptcy protection in August.
There seems to be mounting optimism that the US economy will rebound relatively quickly as states begin opening up and there is progress toward a coronavirus vaccine. But the optimism ignores deep problems in the US economy that existed before the pandemic – chief among them staggering levels of debt and the proliferation of zombie companies.
In the last couple of years, corporate debt has blown through the roof. So much so that the Federal Reserve issued warnings about the increasing levels of corporate indebtedness late last year.
Corporate debt has blown through the roof over the last several years. So much so that the Federal Reserve has issued warnings about the increasing levels of corporate indebtedness.
Borrowing by businesses is historically high relative to gross domestic product (GDP), with the most rapid increases in debt concentrated among the riskiest firms amid weak credit standards.”
But as Brandon Smith of alt-market.com noted in an article published at LewRockwell.com, this is a subject the mainstream media “seems specifically determined to avoid discussing these days when it comes to the economy.
We’ve talked a lot about government debt and consumer debt. In this episode of the SchiffGold Friday Gold Wrap, host Mike Maharrey highlights the massive corporate debt bubble. As he explains, it’s eerily similar to the mortgage debt bubble the blew up in the years prior to the 2008 crash. It’s a little like deja vu all over again. He also covers another round of gloomy economic data that came out this week.
There is a massive corporate debt bubble floating around out there, and when it pops, it will likely take a lot of companies down with it.
Outstanding corporate debt in the US stands at almost $10 trillion, according to SEC Chairman Jay Clayton. That’s nearly 50% of GDP.
News of a possible “phase 1 trade deal” and movement toward a resolution of the Brexit fiasco have buoyed stocks and put a lid on silver and gold this week. But positive vibes on these two fronts overshadowed a lot of economic data that came out this week that was less than ideal. It seems the American consumer might be getting close to being maxed out. In this episode of the SchiffGold Friday Gold Wrap podcast, host Mike Maharrey digs into a big pile of debt and more.
