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'This is Crazy, This Is Crazy, This is Crazy' – Corporate Debt Rising

ByGary Gordon
Published 06/12/2020, 01:01 PM
Updated 07/09/2023, 06:31 AM

In every recession, corporations reduce their leverage to shore up their balance sheets. Until now.

U.S. corporate debt is heading for 50% of GDP. That’s not merely a new record – it’s other-worldly.

In 2000, as well as 2008, bubbly asset price excesses reversed course around the time that corporate debt-to-GDP reached 45%. In Q2 of 2020, as the economy contracts further and as companies issue even more debt, the NASDAQ has been hitting new records.

The Federal Reserve is determined to put as much air into the stock bubble as it possibly can. There’s no end to the money printing, government debt monetization and corporate debt bailouts.

In the words of National Lampoon’s Clark Griswold, “This is crazy. This is crazy. This is crazy.”

Latest comments

Corporations borrowing bc of low-interest rates.  No big news here. Bank it for future use.
Record low interest rates are part of the equation. What is the debt load?
Changing 100$
There is no turning back for Fed now, the show must go on... until the music stops. There is a massive disconnect between Wall Street and the Main street. But there is only so much the paper warriors can do unless the real economy starts functioning normally. For now, rich become reacher at the poor's expense.
A perfect ponzi scheme! Corporations extend credit to their customers and receive credit from their suppliers. But cash, the reconciler of accounts, now becomes more valuable in corporate buy-backs.. so spend it to make the execs wealthy and when the time comes to reconcile accounts, just sharpen your pencils and rebalance everything with more credit..until the FED sees the hungry, rioting in the streets.
After a while, if businesses dont start making revenues, the Feds help won’t have the same effect. It’s time for corporations to put up or shut up.
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