With interest rates low and going lower over, U.S. businesses are $17 trillion in debt, which accounts for 79 percent of U.S. GDP.
As the economic recovery sags and equity markets rattle, we forecast a sharp rise in corporations defaulting on their debts, which will result in more businesses going bust and millions more filling up the unemployment lines.
Globally, corporations defaulted on bonds worth a face value of $94 billion during the global economic shutdown, with U.S. companies accounting for about $70 billion.
From January through June, 3,604 companies filed for Chapter 11 bankruptcy, a 26-percent increase year-on-year, according to Epiq, a legal services firm. “Tens of thousands” more are drifting toward insolvency.
TREND FORECAST: The amount of American business, government, and personal debt has more than doubled since the 1980s.
The U.S. Congress is contemplating an additional $1 trillion in rescue and stimulus spending to boost the economy and help bail out the corporate sector.
Any relief will be temporary. Long term, we forecast more highly indebted companies, especially those in hard-hit sectors such as dining, travel, hospitality, and entertainment, will not survive.
