Why Bankruptcy Is the New Black - John Butler

A recent study by Deutsche Bank points out that the main reason why corporate default rates have not soared in recent years is due to the "unprecedented intervention" of European and U.S. policy makers. Well, with the European economy now slowing and that of the US limping along in what can only loosely be termed a ‘recovery', without fresh stimulus, the chickens will soon find their way home to roost. ... US nonfinancial corporations in general are more liquid than they were in 2008, they are not yet materially less leveraged and, importantly, they are much more highly leveraged than has ever been the case prior to an investment boom. In other words, if you are waiting for investment to lead the way to recovery, a great deal of de-leveraging is required. As it happens, wave of corporate bankruptcies would accomplish that in short order.