CV Central - 6/12/2020 - "For Whom The Closing Bell Tolls"
Episode 82 looks at our economy and reveals the house of cards that has been built upon the increasingly shaky foundation of corporate debt. Counting on businesses to stay afloat, the shock of the coronavirus pandemic and all it has wrought has put retail out of business in huge numbers, threatening commercial mortgage defaults. The Fed intervened and changed the rules to ensure corporate debt would remain liquid, which led to corporations acting like banks to buy their own debt with money basically created in the market through changes in Fed policy and the policy changes enacted by the CARES act, inflating a gigantic bubble. But where 2008 was about mortgages, 2020 is about corporate bonds and CLOs, collateralized loan obligations. Corporations issue debt the Fed backstops which the banks then buy when rebundled into assets about those loans in a cynical pyramid scheme just waiting for a second wave to topple it, or perhaps China dumping debt, as we ask what a post-dollar world might look like? With America adding trillions of debt both on and off books, the financial attack upon us, and the sordid system trying to save itself at the impoverishment of our people might yet prove still the greatest risk of all, amplifying all the threats we already face beyond our ability to survive.
Retailers getting crushed as malls close: https://www.businessinsider.com/retail-store-closings-mount-in-blow-to-shopping-malls-2020-6
How the Fed saved corporate debt and took ownership of the bond market: https://theintercept.com/2020/05/27/federal-reserve-corporate-debt-coronavirus/
How the banks have that same debt on balance and the risks of systemic financial collapse of a character but far greater magnitude than 2008 exists: https://www.theatlantic.com/magazine/archive/2020/07/coronavirus-banks-collapse/612247/
Total US debt surges past $55 trillion as government debt crosses $26 trillion: https://www.cnbc.com/2020/06/11/total-us-debt-surges-to-55point9-trillion-amid-big-increases-in-corporate-and-government-borrowing.html
Evidence China is pulling out as creditor: https://www.marketwatch.com/story/china-may-sell-treasurys-but-that-doesnt-mean-its-weaponizing-its-more-than-1-trillion-hoard-of-us-debt-says-deutsche-bank-2020-06-02
A dollar collapse ahead: https://www.bloomberg.com/opinion/articles/2020-06-09/a-dollar-collapse-is-coming-but-when
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