Het Wolfstreet report van vandaag concentreert zich de bailout van Wallstreet door de Fed. Had die het beoogde effect, en wat bereikte men er wèl mee?

Over the past two years, nobody knew what would trigger the next financial crisis, but just about everyone knew it would involve the record pile of corporate debt. And so it happened. Now the Fed fixed it…

Duur: 11:56 min.

Publicatie 3 mei

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Something spectacular happened in April, despite the gut-wrenching phenomenon that 30 million people lost their jobs in the United States: In late February and early March, credit markets were freezing up and corporate bonds, particularly junk bonds and the lowest rungs of investment-grade bonds, were in the process of imploding. But then in late March and in all of April, companies issued record amounts of bonds under blistering demand from once again yield-chasing institutional investors.

Corporate debt has already been at record high levels by any measure going into the year 2020, and the Fed has been warning about it repeatedly, including in its Financial Stability Reports, and people figured this corporate debt bubble would eventually implode and put the economy at risk, and it could cause another Financial Crisis because at the next downturn, credit could freeze up and these companies would run out of cash and wouldn’t be able to refinance their debts, and wouldn’t even be able to make interest payments. And defaults, debt restructurings, and bankruptcies would become the new growth industry.

Corporate leverage was gigantic. But no one cared. And then came February 20, when it began to unravel. And suddenly, people cared. By early March, junk bond issuance was freezing up. And it became clear that these overleveraged companies couldn’t refinance their debt, couldn’t borrow money to fund their losses, and would run out of cash soon, and would default.

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