Next-Generation Crazy: The Fed Plans For The Coming Recession

Insanity, like criminality, usually starts small and expands with time. In the Fed’s case, the process began in the 1990s with a series of (in retrospect) relatively minor problems running from Mexico’s currency crisis thorough Russia’s bond default, the Asian Contagion financial crisis, the Long Term Capital Management collapse and finally the Y2K computer bug.
With the exception of Y2K – which turned out to be a total non-event – these mini-crises were threats primarily to the big banks that had unwisely lent money to entities that then flushed it away. But instead of recognizing that this kind of non-fatal failure is crucial to the proper functioning of a market economy, providing as it does a set of object lessons for everyone else on what not to do, the Fed chose to protect the big banks from the consequences of their mistakes. It cut interest rates dramatically and/or acquiesced in federal bailouts that converted well-deserved big-bank losses into major profits.
The banks concluded from this that any level of risk is okay because they’ll keep the proceeds without having to worry about the associated risks.
At this point – let’s say late 1999 – the Fed is corrupt rather than crazy. But the world created by its corruption was about to push it into full-on delusion.
The amount of credit flowing into the system in the late 1990s converted the tech stock bull market of 1996 into the dot-com bubble of 1999, which burst spectacularly in 2000, causing a deep, chaotic recession.

This post was published at DollarCollapse on NOVEMBER 17, 2017.

Corporate Bond Defaults Hit Highest Rate Since Financial Crisis

Corporate bond defaults have just crossed an ominous milestone.
Fully 100 companies have defaulted on debt, 50 percent more than for the same period in 2015 and the highest level since 2009, according to S&P Global Ratings. Low oil and commodity prices, along with financial market volatility in the United States and abroad, have been the primary problems for the bond market this year. While the actual ratio of distressed issues is on the decline, the level of defaults has climbed.
While the defaults have been weighted heavily to the energy sector, analysts at S&P said there’s no guarantee things will stay that way.
‘Over the past year, we have seen a strong increase in both the number and percentage of defaults in the energy and natural resources sector,’ the agency said in a note. ‘So far, there has been little spillover effect into other sectors, but we are not ruling this out in the coming quarters.’

This post was published at David Stockmans Contra Corner By Jeff Cox, CNBC ‘ July 15, 2016.

Energy Sector Defaults could go like Dominoes – -Up To $40 Billion This Year Alone

Energy-sector bond defaults – and for some producers, bankruptcy risks – are piling up, and coal liabilities aren’t the only culprit. Oil-and-gas producers, suffering with low crude prices after a shale revolution made the U. S. a viable energy producer, are smothered under their own junk bonds.
Small- and medium-size U. S.-based producers, especially those that expanded with the shale boom, are most vulnerable; any blip in oil prices may not be high enough or fast enough to protect all producers. And just this week, at least two more warned about their near-term future. It’s a climate that’s driven some of this sector’s high-yield paper to trade at 30 cents on the dollar or less.
Peabody Energy BTU, 11.87% said Wednesday it filed a ‘going concern’ notice with regulators. Peabody has opted to exercise the 30-day grace period with respect to a $21.1 million interest payment due March 16 on its 6.50% notes due in September 2020, as well as a $50 million interest payment due March 16 on its 10% senior secured second lien notes due in March 2022. Costs and lost business to tougher coal regulation were cited.
But Linn Energy LINE, -9.35% -which on Tuesday filed its own ‘going concern’ after missed interest payments now in a grace period – is primarily an oil-and-gas producer with shale interests in western U. S. states. If it files for bankruptcy protection, its $10 billion in debt would make it the largest U. S. oil company to do so since oil prices began their sharp decline in mid-2014.

This post was published at David Stockmans Contra Corner on March 17, 2016.