- Rickards: Here’s Where the Next Crisis Starts
by JAMES RICKARDS, https://dailyreckoning.com/
So many credit crises are brewing, it’s hard to keep track without a scorecard.
The mother of all credit crises is coming to China with over a quarter-trillion dollars owed by insolvent banks and state-owned enterprises, not to mention off-the-books liabilities of provincial governments, wealth management products and developers of white elephant infrastructure projects.
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Then there’s the emerging-markets credit crisis, with Turkey and Argentina leading a parade of potentially bankrupt borrowers vulnerable to hot money capital outflows and a slowdown of growth in developing economies.
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Close on their heels is the U.S. student loan debacle, with over $1.5 trillion in outstanding debts and default rates approaching 20%. Now we’re facing a devastating wave of junk bond defaults. The next financial collapse, already on our radar screen, will quite possibly come from junk bonds.
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Let’s unpack this…
Since the great financial crisis, extremely low interest rates allowed the total number of highly speculative corporate bonds, or “junk bonds,” to rise 58% — a record high. Many businesses became highly leveraged as a result. There’s currently a total of about $3.7 trillion of junk bonds outstanding.
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And when the next downturn comes, many corporations will be unable to service their debt. Defaults will spread throughout the system like a deadly contagion, and the damage will be enormous.
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read more.
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https://socioecohistory.wordpress.com/2018/07/11/rickards-heres-where-the-next-crisis-starts/