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Anzo Lim

US Faces the Most Dangerous Corporate Debt Bubble in History

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Thanks to incredibly low interest rates, corporate debts in the US has surged to an unprecedented scale in the past decade. This facade of huge “financial boom” faces equal risk of crumpling down. Large companies across the US are striving to tackle high debts, while the default rate is estimated to reach a record level since 2008. A severe corporate debt crisis looms on the horizon.


The debts of listed companies have totaled nearly US$10 trillion, which is equivellance to 47% of the country’s GDP. The extremely low interest rate in the past 10 years enabled companies to sell a record amount of bonds to investors, and corporate debts reached a historical high of nearly US$10 trillion, which is 47% of the country’s overall economy. In recent weeks, US Federal Reserve and IMF both issued warning about growing corporate debts. 10 trillion is in fact a conservative estimation, as the actual figure of corporate debt tend to be much higher, if taking into account of the additional US$5.5 trillion debts from those small-and-medium-size enterprises, family businesses and other companies that are not listed at the stock exchanges.


In other words, US corporate debts now sit at US$15.5 trillion, or 74% of US GDP. Such a high level of debt, with little doubt, is unsustainable. Besides the pressing corporate debt crisis, debts from US consumers are as high as US$14 trillion, while state and local governments’ debts also reached a record level. It’s likely that the country will face a huge wave of borrowers default in the future.

Edited by Anzo Lim
 

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