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U.S. Debt Bubbles are Deflating...

July 17, 2017 (EIRNS)—Signs of growing defaults are showing across the range of ultimately unpayable debt bubbles in the United States economy, while underlying economic growth continues in the crater of a 1.5% nominal GDP annual rate.

The July 17 Wall Street Journal featured a report of an "unheard-of event"—a Houston-based private equity fund once "worth" more than $2 billion, is now worth zero. Even following the report in the July 11 Houston Chronicle that defaults throughout Texas corporations are shooting up and exceed even 2009 economic collapse levels, securities funds of this size losing all their value remains "unheard of"; 25% maximum losses are typical when large PE funds go bust. Yet, the Journal quotes one expert, "several other energy-focused funds are in danger of doing so." Big losers in the evaporation of $2.1 billion EnerVest Ltd. include Canada’s second-largest pension fund, the Teamsters Western Conference Pension Fund; various high-roller charitable foundations like Getty Trust, MacArthur Foundation; and Wells Fargo bank, which loaned EnerVest Ltd. $1.3 billion to leverage its investments in oil securities.

In the consumer debt bubble, auto loan (90-day) delinquencies have reached just under 4% (3.96%) for all $1.3 trillion of auto loans, comparable to the mortgage sector in late 2006. Bloomberg News today reports on growing fraud in auto lending, as well as lax to non-existent underwriting standards, as well as spreading securitization of payments (and thus of defaults) in the entire sector. The volume of both auto and mortgage lending is dropping as the biggest banks head for the exits, according to a separate report in Credit Union Times.

The falling economy is making tax revenues sink. Some 33 states reported shortfalls in projected revenues in their fiscal year, which ended June 30. This was similar to the budget-collapse year 2010. But less publicized has been the fact that the Federal government deficit is ballooning this Federal fiscal year (which ends Sept. 30) because of much lower tax revenues than expected, as well as forced restatement of the value of student debt—because of mass defaults and delinquencies—which counted as a loss of nearly $90 billion for the Federal government in June.