Subscribe to EIR Online


Corporate Default Wave Completely Concentrated in Trans-Atlantic

April 19, 2016 (EIRNS)—Additional reporting today by Standard & Poor’s Ratings Services, makes clear that the large global wave of corporate debt defaults is not global; it is overwhelmingly concentrated in the United States and Europe, linked to the lack of fixed capital investment, productivity growth, or any growth in the trans-Atlantic area.

As previously reported, the amount of corporate debt defaults has reached $50 billion, and the highest total of the century so far was $60 billion through April in 2009; that may well be exceeded by the end of this April. The number of companies defaulting on their debt is also hitting levels of the depths of the financial crisis in 2009.

USA Today reported April 18, based on the S&P report, that 46 companies with significant levels of debt have defaulted so far this year, and 37 were based in the United States, with almost all the rest in Europe. Five defaulted in the week ending April 17, "including New Jersey-based chemical company Vertellus Specialties and Ohio-based iron ore producer Cliffs Natural," as well as the large oil producer Energy XXI.

A significant number of defaults are occurring by companies which "financial engineered" themselves into trouble—(borrowing to buy back their own stock and feed the Fed’s stock bubble). And the number of companies S&P has downgraded for this reason, has reached 61 so far this year and will easily be the highest in any year this century.

It was also reported that both housing construction starts and permits in the United States fell sharply in March, by 8-9%, indicating the recent months’ rise in construction employment—the only "goods-producing" employment which has grown in more than a year—will end.

Back to top