Strong Indicator Of An Imminent Potential Financial Crisis
The soaring consumer and corporate debt levels are presenting signs of potential financial crisis. By 2020, business debt likely will climb to $75 trillion from its current $51 trillion level, according to S&P Global Ratings. Under normal circumstances, that wouldn’t be a major issue so long as credit quality remains high, interest rates and inflation remain low, and the economic growth continues. However, the alternative is less pleasant should those conditions not persist.
Should interest rates rise and economic conditions worsen, corporate America could be facing a major problem as it seeks to manage that debt. Rolling over bonds would become more problematic should inflation gain and rates raise, while a slowing economy would worsen business conditions and make paying off the debt more difficult. In that case, a “Crexit,” or withdrawal by lenders from the credit markets, could occur and lead to a sudden tightening of conditions that could trigger another financial scare.
“A worst-case scenario would be a series of major negative surprises sparking a crisis of confidence around the globe,” S&P said in the report. “These unforeseen events could quickly destabilize the market, pushing investors and lenders to exit riskier positions (‘Crexit’ scenario). If mishandled, this could result in credit growth collapsing as it did during the global financial crisis.”
The consumer credit (excluding mortgages) is approaching 20% of the GDP which is a record. The figure below represent this increasing trend in consumer credit.
http://investmentwatchblog.com/strong-indicator-of-an-imminent-potential-financial-crisis/
nice graph at link
to all of you who aren't paid up and have to go to the slave factory to pay off the debt master:
we salute you
just sayin
The soaring consumer and corporate debt levels are presenting signs of potential financial crisis. By 2020, business debt likely will climb to $75 trillion from its current $51 trillion level, according to S&P Global Ratings. Under normal circumstances, that wouldn’t be a major issue so long as credit quality remains high, interest rates and inflation remain low, and the economic growth continues. However, the alternative is less pleasant should those conditions not persist.
Should interest rates rise and economic conditions worsen, corporate America could be facing a major problem as it seeks to manage that debt. Rolling over bonds would become more problematic should inflation gain and rates raise, while a slowing economy would worsen business conditions and make paying off the debt more difficult. In that case, a “Crexit,” or withdrawal by lenders from the credit markets, could occur and lead to a sudden tightening of conditions that could trigger another financial scare.
“A worst-case scenario would be a series of major negative surprises sparking a crisis of confidence around the globe,” S&P said in the report. “These unforeseen events could quickly destabilize the market, pushing investors and lenders to exit riskier positions (‘Crexit’ scenario). If mishandled, this could result in credit growth collapsing as it did during the global financial crisis.”
The consumer credit (excluding mortgages) is approaching 20% of the GDP which is a record. The figure below represent this increasing trend in consumer credit.
http://investmentwatchblog.com/strong-indicator-of-an-imminent-potential-financial-crisis/
nice graph at link
to all of you who aren't paid up and have to go to the slave factory to pay off the debt master:
we salute you
just sayin
