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Is the Corporate-Debt Bubble Ripe Yet?

Is the Corporate-Debt Bubble Ripe Yet?

What does it mean when the Fed and other central banks jointly bemoan the effects of their own policies? Worried about not being able to keep all the plates spinning?

This is the transcript from my podcast last Sunday, THE WOLF STREET REPORT:

The Federal Reserve, the ECB, the individual central banks of Eurozone countries, such as the Bundesbank and the Bank of France, the central banks of negative-interest-rate countries outside the Eurozone, such as in Switzerland and Sweden, they’re all now lamenting, bemoaning, and begroaning one of the consequences of low and negative interest rates, the ballooning record-breaking pile of business debts.

This is ironic because these outfits that are now lamenting, bemoaning, and begroaning the pileup of business debts are the ones that manipulated interest rates down via their radical and experimental monetary policies, thereby triggering the pileup of business debts.

This debt pileup isn’t an unintended consequence of their policies. It was one of the purposes of their policies.

But central banks also know from history that this historically high level of business debts is a powder keg waiting to explode – company by company at first, and then as contagion spreads, all at once.

The Fed is a superb example. In its most recent “Financial Stability Report,” released in November, the Fed warns about the historic record-breaking pileup of business debts in the US, as a consequence of low interest rates, and it considers this business debt the biggest risk to financial stability in the US.

But this warning came after the Fed had just cut its policy interest rates three times, and after it had begun to bail out the repo market with over $200 billion so far, and after it had begun buying $60 billion a month in T-bills, in total printing over $300 billion in less than three months, to repress short term rates in the repo market and to bail out its crybaby-cronies on Wall Street – and not necessarily banks – that had become hooked on these low interest rates.

…click on the above link to read the rest of the article…

THE WOLF STREET REPORT: Is the Corporate-Debt Bubble Ripe Yet?

THE WOLF STREET REPORT: Is the Corporate-Debt Bubble Ripe Yet?

What does it mean when the Fed and other central banks jointly bemoan the effects of their own policies? Worried about not being able to keep all the plates spinning? (11 minutes)

THE WOLF STREET REPORT: How the SoftBank Scheme Rips Open the Tech Bubble

THE WOLF STREET REPORT: How the SoftBank Scheme Rips Open the Tech Bubble

The biggest force behind the startup bubble in the US has been SoftBank. But the scheme has run into trouble, and a lot is at stake (12 minutes).

THE WOLF STREET REPORT: The Giant Sucking Sound of Financial Repression

THE WOLF STREET REPORT: The Giant Sucking Sound of Financial Repression

In the US alone, it impacts nearly $40 trillion. And there are consequences for the real economy (10 minutes).

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The Wolf Street Report

THE WOLF STREET REPORT

Market Exuberance Ends, Pain Starts

In the 14 months from the presidential election through January 2018, the Dow soared 49%. Housing prices soared too. The real economy followed. Consumers went on a spending spree. But now, this phenomenon — the surge in exuberance among consumers, investors, homebuyers, speculators, business-decision makers, and the like, often called the “Trump Bump,” whether or not Trump had anything to do with it — is petering out. So what will happen as this exuberance deflates? (13 minutes)

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