2018-09-23 08:37:00 Sun ET
Bank of America Merrill Lynch's chief investment strategist Michael Hartnett points out that U.S. corporate debt (not household credit supply or bank capital shortage) can cause the next financial crisis.
U.S. public corporations have gradually accumulated more than $6 trillion debt with low interest rates since the global financial crisis from 2008 to 2009. This corporate debt binge helps fund the recent recovery in new capital investment and equipment, full employment, and stock buyback in America.
Corporate default rates are minuscule, and U.S. companies now sit on hefty cash stockpiles primarily due to robust U.S. economic output gains and corporate tax cuts under the Trump administration. At some inflection point, however, economic growth and corporate income may start to slow down. U.S. companies then would have less firepower to pay back debt, and it is not easy for these companies to roll over their debt in due course. Debt-laden companies would be vulnerable to higher costs of capital as the Federal Reserve continues the current interest rate hike.
These high costs of capital can translate into a new corporate credit crunch, which adversely affects both employment and capital investment as the U.S. economy slides into an economic recession.
If any of our AYA Analytica financial health memos (FHM), blog posts, ebooks, newsletters, and notifications etc, or any other form of online content curation, involves potential copyright concerns, please feel free to contact us at service@ayafintech.network so that we can remove relevant content in response to any such request within a reasonable time frame.
2017-11-03 06:41:00 Friday ET
Broadcom, a one-time division of Hewlett-Packard and now a semiconductor maker whose chips help power iPhone X, has announced its strategic plans to move it
2020-01-08 08:25:00 Wednesday ET
Conservative Party wins the British parliamentary majority in the general election with hefty British pound appreciation. In response to this general electi
2019-07-05 09:32:00 Friday ET
Warwick macroeconomic expert Roger Farmer proposes paying for social welfare programs with no tax hikes. The U.S. government pension and Medicare liabilitie
2019-01-05 11:39:00 Saturday ET
Reuters polls show that most Americans blame President Trump for the recent U.S. government shutdown. President Trump remains adamant about having to shut d
2019-05-03 11:29:00 Friday ET
Key tech unicorns blitzscale business niches for better scale economies from Uber and Lyft to Pinterest, Slack, and Zoom. LinkedIn cofounder and serial entr
2019-02-11 09:37:00 Monday ET
Corporate America uses Trump tax cuts and offshore cash stockpiles primarily to fund share repurchases for better stock market valuation. Share repurchases