Sunday , May 26 2019
Home / David Stockman's Contra Corner / Same Old, Same Old: Business Cycle Aging, Credit Standards Falling, Default Crisis Dead Ahead

Same Old, Same Old: Business Cycle Aging, Credit Standards Falling, Default Crisis Dead Ahead

Summary:
The ultra-low interest rates which central banks have facilitated since 2008 have lowered borrowing costs and lending standards, allowing companies to pursue risky and long-term projects by taking on more debt than they otherwise would have found possible, while at the same time making creditors more eager to lend to high-risk companies in pursuit of their accompanying slightly higher returns. When the threat of inflation finally forces central banks to raise interest rates again, as they are already beginning to do, many of these borrowers will be forced to default on their increasingly expensive debts, and the crash will have begun. The greater the extent to which global financial

Topics:
David Stockman considers the following as important:

This could be interesting, too:

David Stockman writes Why Tariffs Won’t Solve The Massive China Trade Deficit

David Stockman writes Tesla: Not A Real Car Company—Just A Financial Ponzi By Any Other Name

David Stockman writes How Washington Has Become a Warmonger’s Paradise

David Stockman writes Crash Alert Flag Still Flying—-The Selling Ain’t Over Yet

The ultra-low interest rates which central banks have facilitated since 2008 have lowered borrowing costs and lending standards, allowing companies to pursue risky and long-term projects by taking on more debt than they otherwise would have found possible, while at the same time making creditors more eager to lend to high-risk companies in pursuit of their accompanying slightly higher returns. When the threat of inflation finally forces central banks to raise interest rates again, as they are already beginning to do, many of these borrowers will be forced to default on their increasingly expensive debts, and the crash will have begun. The greater the extent to which global financial institutions have exposed themselves to these junk debt CDOs by that point, the more quickly will the crisis spread throughout the financial system.

http://davidstockmanscontracorner.com/?p=283459&preview_id=283459&preview_nonce=3e1d23a9f2&preview=true

David Stockman
David Alan Stockman (born November 10, 1946) is a former businessman and U.S. politician who served as a Republican U.S. Representative from the state of Michigan (1977–1981) and as the Director of the Office of Management and Budget (1981–1985) under President Ronald Reagan.

Leave a Reply

Your email address will not be published. Required fields are marked *