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Debt Load on U.S. Corporations Goes Well Above Any Previous Level

Aug. 8, 2017 (EIRNS)—In a reminder that the debt of U.S. non-financial corporations, doubled in seven years, is going to collapse, Zero Hedge today published a report by a Goldman Sachs researcher. The report is that for all corporations except financial, the ratio of the net debt of the companies, to their earnings, is at the level of 1.8:1. The previous highest level ever reached, was 1.52:1 in the second half of 2008, immediately before the financial crash. The measure for the earnings is EBIDTA, "earnings before interest, taxes, depreciation and amortization;" so the ratio is based on a measure of revenue which is considerably more than the companies actually have available to pay any principal on their debts.

At the same time, the report notes,

"The demand for high-yield paper [i.e., more new debt issued by companies which already are overindebted and are at risk for default—ed.] has never been greater."