US businesses owe US $ 10,000 billion: The worst scenario
According to IIF, the ’explosive bomb’, called global debt, will be even more dangerous in the context of trade war.
Since the 2008 financial crisis, corporations have been caught in debt amid data that surprises economists. In recent months, experts have warned that corporate debt is “bloating” and is likely to depress the economy in the near future.
According to a report from the International Monetary Fund (IMF), when central banks around the world have loosened monetary policy over the past decade, corporations have felt encouraged to pursue “risks.” finance”. Such dynamism has made some economies more vulnerable to the recession.
“The influence of corporations can create great shocks for the economy, because the bankruptcy of enterprises can make investors depressed, leading to higher unemployment rates, the dong. causes losses to banks, “the IMF warned.
BlackRock, an American global investment management group, said the BBB-rated bond, the lowest bracket of investment debt ratings, now accounts for more than 50% of the market compared to 17% in 2001.
As the need to rank investment debt increases, the reputation of the issuer will be increasingly reduced. According to BlackRock, this escalation is gradually rising to its highest level since 1992.
“We believe that a sharp increase in the proportion of BBB-ranked components has made the investment-grade bond industry more risky than in recent years. BBB bonds are the most vulnerable factor. in all the debt ratings of the recession, “the BlackRock report states.
The US Federal Reserve has also expressed its concern that the huge BBB-rated debt is about to reach an all-time high.
“During the economic downturn, lowering bond prices to speculative ratings could lead investors to sell their bonds quickly, increasing market liquidity and pressure to reduce prices in a fraction,” he said. The corporate bond market segment has shown relatively low liquidity, “according to the Central Bank report.
According to the US Federal Reserve, the debt-to-assets ratio of all publicly traded nonfinancial companies has reached its highest level in two decades and the escalation rate among many heavily indebted debt companies is close to reaching. near the historic high.
The International Finance Institute (IIF) warns that global debt levels hit record highs and cannot be controlled as a result of irresponsible policies by central banks, the cost of money printing addiction and distribution. loan amount.
Governments, businesses and individuals borrow money to develop the economy; and when growth did not occur, they borrowed more, as the largest Central Banks applied low interest rates.
Even before the US Federal Reserve relaxed monetary policy, some Central Banks in developing countries have already cut interest rates.
In particular, according to IIF “slow explosive bomb” named global debt will be even more dangerous in the context of trade war. With the tariff barrier still in place, trade will become more and more muffled, making it harder for businesses to borrow money.
“In the end, the world economy will slow down, or worse, go into crisis. At that time, the crisis will be even worse than the 2008 crisis,” IIF concluded.
IIF said that the two “low-explosive bombs” at the highest risk of detonation are the United States and China – where total debt is many times larger than GDP. If only one of them defaults, the world will immediately fall into an economic crisis with no way out.