Credit Markets Are Creaking, Creating Economic Uncertainty

July 26, 2023 | News

Excerpts:

Moody’s Investors Service has estimated that defaults on risky debt will peak at 5.1 percent globally early next year, up from relatively low levels currently.

But in a sign of the uncertainty over the severity of debt distress on the horizon, the Moody’s forecast also suggested that in a “severely pessimistic” scenario defaults on risky debt could jump to 13.7 percent in a year, higher than the 13.4 peak reached during the 2008 financial crisis.

“You don’t know when it’s going to happen, or to what degree,” Mr. Zandi said, explaining that while financial risk may not be the Fed’s top concern today, “it’s one of those things that goes immediately to the top of the list when something breaks, when that gasket blows.”

The post Credit Markets Are Creaking, Creating Economic Uncertainty appeared first on New York Times

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US Corporate Debt Defaults In 2023 Surpass Last Year’s Total: Moody’s

ZeroHedge, Jul 21, 2023 – Excerpts:

Authored by Bryan Jung via The Epoch Times,

The total amount of corporate debt defaults in the United States this year have already exceeded the amount seen in 2022.

Experts have been warning of a wave of defaults to hit the economy for some time due to higher borrowing rates.

At least fifty-five American-based companies defaulted on their loans in the first half of 2023, according to data from Moody’s Investors Services.

That is a 53 percent increase from the total number of defaults last year, when just 36 companies said they would fail to repay their debt obligations to lenders.

Moody’s blamed higher borrowing costs and tight lending standards for adding pressure on companies reliant on credit. In May alone, there were 16 corporate debt defaults worldwide, up from 12 in April.

Economic uncertainty and higher interest rates have made it more difficult for borrowers to refinance existing loans or mature their debt, and has them with few options because they lack the cash to repay their creditors.

The aggressive monetary-tightening policies of the Federal Reserve have been a major factor in pushing many companies into default by making it harder to pay back their loans.

The spike in interest rates and the growing number of banks unwilling to issue new loans in the wake of the regional bank crisis this spring has exacerbated the situation.

Firms unable to repay their creditors are prevented from restructuring and forced to file for bankruptcy.

“Banks are battening down the hatches, hogging their bailout money instead of lending it out,” said Pete St. Onge, a Heritage Foundation economist, in a recent podcast.

“That credit crunch means not only do we get bankruptcies like in any recession, on top of that, we get a lending wall that cuts off even the healthy businesses. Of course, their jobs go down with them.”

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“Capital is much more expensive now,” Mohsin Meghji, chairman of the restructuring advisory firm M3 Partners, told CNBC on June 24.

“Look at the cost of debt. You could reasonably get debt financing for 4 percent to 6 percent at any point on average over the last 15 years. Now that cost of debt has gone up to 9 percent to 13 percent,” he said.

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Meanwhile, Bank of America warned in May that a tougher credit environment combined with a full-blown recession could result in nearly a $1 trillion in corporate debt defaults.

Total loan defaults in the United States could rise to 11.3 percent in a credit crunch, just below the all-time-high of 12 percent seen during the Great Recession, according to Deutsche Bank.

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Moody’s analysts noted that the five sectors with the most defaults in 2023 were business services, health care and pharmaceuticals, retail, telecommunications, and the hospitality sector.

U.S. corporate debt defaults account for the most of the total defaults worldwide this year, with 81 firms in total failing to make payments on their debts in the first half of 2023.

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There were 340 bankruptcy filings by July of this year, not far behind the total of 374 in 2022, according to S&P Global Market Intelligence.

Standard & Poor’s reported more than 230 bankruptcy filings through April of this year, the highest rate for that period since 2010.

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Question: Does the Federal Reserve or the Department of the Treasury have a plan to clean this mess up and get America back on track:

Answer: No

Question: Do Washington-based Democrats and Republicans have a plan.

Answer: No. Both parties are clueless.

Main Street America Republicans do have a plan:

The Leviticus 25 Plan is a dynamic economic initiative providing direct liquidity benefits for American families, while at the same time scaling back the role of government in managing and controlling the affairs of citizens.  It is a comprehensive plan with long-term economic and social benefits for citizens and government.

The inspiration for this plan is based upon Biblical principles set forth in the Book of Leviticus, principles tendering direct economic liberties to the people.

The Leviticus 25 Plan – An Economic Acceleration Plan for America

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Washington Democrats are by any measure oblivious to America’s looming debt catastrophe.

Washington Republicans, shamefully enough, have no economically viable, politically feasible plan for solving the national debt crisis and getting America back on track.

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Endgame: US Federal Debt Interest Payments About To Hit $1 Trillion

ZeroHedge, Jul 14, 2023 – Excerpts:

There was a shocking number in today’s latest monthly US Budget Deficit report. No, it wasn’t that US government outlays unexpectedly soared 15% to $646 billion in June, up almost $100 billion from a year ago…

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… while tax receipts slumped 9.2% from $461 billion to $418 billion, resulting in a TTM government receipt drop of over 7.3%, the biggest since June 2020 when the US was reeling from the covid lockdown recession; in fact never have before tax receipts suffered such a big drop without the US entering a recession.

Needless to say, surging government outlays coupled with shrinking tax revenues meant that in June, the US budget deficit nearly tripled from $89 billion a year ago to $228 billion, far greater than the consensus estimate of $175 billion. One can only imagine which Ukrainian billionaire oligarch’s money laundering bank account is currently enjoying the benefits of that unexpected incremental $50 billion US deficit hole: we know for a fact that the FBI will never get to the bottom of that one, since they can’t even figure out who dumped a bunch of blow inside the White House – the most protected and surveilled structure in the entire world.

And with the monthly deficits coming in higher than expected and also far higher than a year ago, it is also not at all surprising that the cumulative deficit 9 months into the fiscal year is already the 3rd highest on record, surpassed only by the crisis years of 2020 and 2021: at $1.393 trillion, the fiscal 2022 YTD deficit is already up 170% compared to the same period last year.

…[T]he one number that was truly shocking was found all the way on page 9, deep inside Table 3 of the latest Treasury Monthly Statement: the only highlighted below, and which shows that in the 9 months of the current fiscal year, the US has already accumulated a record $652 billion in gross debt interest.

This number was more than 25% higher compared to the Interest Expense payment for the comparable period a year ago, which amounted to $521 billion.

Soaring interest rates, driven by the panicked Fed’s scramble to undo its epic policy failure of 2020 and 2021 when the Fed kept rates at zero for far too long while injecting trillions into various asset bubbles, have been the key driver of the deficit, with the Federal Reserve boosting its benchmark rate by 5% since it began hiking in March last year. Five-year Treasury yields are now about 3.96%, versus 1.35% at the start of last year. As lower-yielding securities mature, the Treasury faces steady increases in the rates it pays on outstanding debt: that’s right – even when the Fed starts cutting rates, due to the delay of rolling over maturing debt, actual interest payments will keep rising for the foreseeable future.

For context, the weighted average interest for total outstanding debt at the end of June was only 2.76%, a level that’s not been surpassed since January 2012, according to the Treasury. That’s up from 1.80% a year before, the department’s data show, and if the Fed indeed keeps rates “higher for longer”, the blended rate on the debt will surpass 4% in one year.

That would be a complete disaster for the US, and it would mean that interest payments on total US debt of $32.3 trillion would hit $1.3 trillion within 12 months, potentially making interest on the debt the single biggest US government expenditure and surpassing social security!

But we don’t even have to wait that long until the exploding interest on US government debt becomes a major talking point ahead of the coming presidential elections. According to the St Louis Fed’s FRED and the BEA, the interest payments by the Federal Government have now surpassed $900 billion for the first time ever, and within a quarter will hit probably rise above $1 trillion, a historic benchmark that will probably begin the countdown to the US Minsky Moment.

Source

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In short, the endgame has now arrived, and all the US can do now is rearrange the deck chairs.

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The endgame has not arrived, and there is no fatalistic need to “rearrange the deck chairs.”

It is all a simple matter of re-targeting Fed liquidity flows…

Main Street America Republicans have just such a plan – the most powerful, debt-busting, outside-the-box, economic acceleration plan in the world.

The Leviticus 25 Plan is a dynamic economic initiative providing direct liquidity benefits for American families, while at the same time scaling back the role of government in managing and controlling the affairs of citizens.  It is a comprehensive plan with long-term economic and social benefits for citizens and government.

The inspiration for this plan is based upon Biblical principles set forth in the Book of Leviticus, principles tendering direct economic liberties to the people.

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America’s federal debt is being properly recognized as “a national security issue.”

GAO June 2023:  The federal government faces an unsustainable long-term fiscal future. At the end of fiscal year 2022, debt held by the public was about 97 percent of gross domestic product (GDP). Debt held by the public is projected to grow at a faster pace than the size of the economy and reach its historical high of 106 percent of GDP within 10 years, then continue to grow at an increasing pace.

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Peter G. Peterson Foundation, June 7, 2023: The country’s fiscal trajectory got notably worse over the past year, according to projections from the Congressional Budget Office (CBO) released in May. Federal deficits will total $19.0 trillion over the 2023–2032 period if no new legislation targeting spending or revenues is enacted — a $3.3 trillion increase from the agency’s projections made in May 2022. The stark changes in CBO’s baseline projections, which do not reflect the enactment of the Fiscal Responsibility Act of 2023, show a worsening of the country’s fiscal outlook resulting from legislation over the past year, a less-favorable economic outlook, and other factors.

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Wolff Street, May 29, 2023 : Interest expenses on the national debt spiked to $232 billion in Q1 (not seasonally adjusted), a new record obviously, because of the mix of the ballooning national debt and the much higher interest rates on newly issued Treasury securities that replace maturing securities or fund the new deficits.

After the debt ceiling is raised this week, the Treasury department will issue a tsunami of Treasury bills, with interest rates well above 5%, and they will add to that interest expense in short order:

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If Washington Republicans have a plan, they should present it now. If they don’t have a plan for addressing this critical national security issue, then they have no business collecting their paychecks.

America’s Main Street Republicans have a plan – one that will generate $619.5 billion budget surpluses annually, during its first five years of activation (2024-2028); stimulate long-term economic growth; rejuvenate a free market business cycle; and restore financial security for America’s hard-working, tax-paying U.S. citizens:

2023 Economic Scoring:

 ·    The Leviticus 25 Plan – 2024 Generates $619.5 billion Federal Budget Surpluses (2024-2028) Part 1: Overview, Deficit Projection

 ·    The Leviticus 25 Plan Generates $619.5 Billion Federal Budget Surpluses Annually (2024-2028). Part 2: Federal Income Tax Recapture; Economic Security / Means-Tested Welfare Recapture.

 ·    The Leviticus 25 Plan Generates $619.5 Billion Federal Budget Surpluses Annually (2024-2028). Part 3: Medicaid, Medicare, VA, TRICARE, FEHB, SSDI Recapture.

 ·    The Leviticus 25 Plan Generates $619.5 Billion Federal Budget Surpluses Annually (2024-2028). Part 4: Interest Expense Recapture, Totals Summary

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The Leviticus 25 Plan is a dynamic economic initiative providing direct liquidity benefits for American families, while at the same time scaling back the role of government in managing and controlling the affairs of citizens.  It is a comprehensive plan with long-term economic and social benefits for citizens and government.

The inspiration for this plan is based upon Biblical principles set forth in the Book of Leviticus, principles tendering direct economic liberties to the people.

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Staggering …

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Federal Agencies Admit To $3 Trillion In Improper Payments Since 2004

ZeroHedge, Jun 14, 2023 – By Adam Andrzejewski from OpenTheBooks on Substack

Excerpts:

OpenTheBooks.com auditors quantified the improper and mistaken payments admitted to by the 17 largest federal agencies. It amounts to a staggering $2.9 trillion since 2004, when the totals are adjusted for inflation.

Last year, in 2022, improper and mistaken federal payments totaled $247 billion. That’s about $20.5 billion per month, or more than $675 million every, single day.

What exactly is an improper payment? Federal law defines the term as “payments made by the government to the wrong person, in the wrong amount, or for the wrong reason.”

In other words, a corner grocery store has better accounting controls than our $6.82 trillion U.S. federal government had in 2021.

Pandemic Pinnacle

As the perennial debt ceiling debate raged on inside the Beltway last month, some politicians continued suggesting that even minor spending reductions would be some sort of crisis. But our latest research makes it clear: there is a staggering amount of waste and mistakes to rein in.

The worst year on record was 2021, at the height of the Covid pandemic, when $281 billion was paid out incorrectly. However, in 2022, because of Covid protocols, agencies just weren’t counting some of the mistakes. According to the Government Accountability Office, some programs were “risk-susceptible” as money for Covid aid was quickly shoveled out by Congress. So, the total improper payments certainly would have rivaled the previous worst year ever.

The mistakes since 2004 run at an average of more than $150 billion per year, or more than $400 million paid incorrectly every day.

In 2022, the incorrect payments totaled $1,673 for every individual tax return filed that year. (167,915,264, according to the IRS). They amounted to $846 for every man, woman, and child in the country.

So, the government wasted $3,384 for every family of four – an amount equal to two average mortgage payments. (331,893,745, U.S. pop in 2021, from U.S. Census Bureau website).

Using state-of-the-art tools, our auditors pored over the federal mistaken payments; the results are published here. The findings are stunning given the continued angst over finding budget efficiencies to get the nation’s fiscal house in order.

Annual Report: https://www.openthebooks.com/assets/1/6/OpenTheBooks.com_Annual_Report_2022_FINAL.pdf

Many Federal Agencies Have an Enormous Error Rate.

The biggest offenders: the Departments of Human & Human Services (HHS), Treasury, Labor (DOL), and Education (ED); and the Small Business Administration (SBA).

Improper payments in health care are especially troubling. In 2011, when President Barack Obama signed the Affordable Care Act, Congress vowed to help pay for it by rooting out waste, fraud, corruption and taxpayer abuse from the Medicare and Medicaid programs.

That never happened.

In fact, the improper payments within these programs soared from $64 billion in 2012 to $136 billion today.

How did the feds waste our money in 2022? Covid-aid programs, as the GAO has said, were especially susceptible to mistakes. Those were in addition to the perennial botched spending.  

For starters, dead people received $533 million in benefits: social security payments, federal pensions, and old-age, survivors, and disability insurance kept flowing long after these Americans were gone.

* * *

A few more egregious examples:

• The Small Business Administration made improper payments through seven of its programs. The Paycheck Protection Program, or PPP, was designed to help small businesses keep employees during the draconian shutdown measures. But it misspent more than $29 billion—$16.5 billion through “unknown” payments, and $12.5 billion by “improper” payments. (The SBA Inspector General has also admitted to $100 billion in fraudulent aid, including $78.1 billion in PPP fraud.)
• The Department of Labor spent $18.9 billion incorrectly. Federal State Unemployment Insurance, a program that historically makes up most of the total improper payments, did so again. (Current estimates are $400 billion in unemployment fraud!)
• At the Social Security Administration, the Old-Age, Survivors, and Disability Insurance program flubbed $2.5 billion, while Supplemental Security Income sent $4.9 billion astray.
• 14 Department of Agriculture programs botched $19 billion worth of spending. The Farm Service Agency Coronavirus Food Assistance Program mis-spent $743 million.
• The Commodity Credit Corporation Agriculture Risk Coverage and Price Loss Coverage lost $379 million.
• The Department of Education admitted that nearly $6 billion went wrong from funds earmarked for “COVID-19 recovery and rebuilding efforts.” Pell Grants, meanwhile, wasted $586 million.

These are just a few of the seemingly endless examples. Read through all of them here.

While lawmakers fight over how many trillions to spend per year, every dollar blown hurts the taxpayers and fails a critical mission.

Federal bureaucrats must find ways to provide more adequate spending controls and stem this enormous tide of improper payments. Otherwise, government waste of this magnitude will only continue eroding the public trust.

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America’s powerhouse economic plan – to reduce dependence on government, reduce poverty, and promote positive self-reliance by the citizenry:

The Leviticus 25 Plan – An Economic Acceleration Plan for America

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More sterling examples of how well the U.S. government is managing the hard-earned tax dollars paid in by U.S. citizens…

Programs scammed: SBA loans, Unemployment Insurance, U.S. Dept of Agriculture.

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$200 Billion In SBA Covid Relief Money Went To Fraudsters, Inspector General Reports

ZeroHedge, Jun 28, 2023 – Excerpts:

The multifaceted toll of government mishandling of the Covid-19 pandemic grows ever larger.

Last week brought another grim report on learning loss among children victimized by needless school shutdowns. On Tuesday, we learned that fraudsters scooped up more than $200 billion in Small Business Administration (SBA) Covid-19 relief money, according to a report from the SBA’s Office of Inspector General. 

That represents a whopping 17% of the $1.2 trillion dished out by the SBA via Economic Injury Disaster Loans (EIDL) and the Paycheck Protection Program (PPP). The knowledge of major fraud in the SBA programs isn’t new, but the latest estimate of the damage is well higher than previous estimates….

“Office of Inspector General (OIG) reports issued very early on warned of the importance of a strong internal control environment to mitigate fraud risk… 

The report offers examples of various types of fraud. One “sprawling conspiracy” centered on claims submitted for 1,300 fake businesses; its masterminds stole $140 million and the OIG said the estimate could rise to $625 million. 

In another episode, a female US Army Chief Warrant Officer at Fort Stewart, Georgia teamed up with several other crooks to “scam the system 150 times over, securing $3 million for herself and those involved in the conspiracy,” the reports says.

The OIG says its investigations have thus far contributed to 803 arrests, 529 convictions and the recovery of $30 billion, with tens of thousands of leads still being worked. 

Former Georgia pastor Mack Devon Knight was sentenced to 29 months in prison for bilking the SBA out of $149,000 and buying a Mercedes-Benz S-Class sedan….

The SBA OIG attributed $136 billion of the fraud to the EIDL program, which provided long-term, fixed-rate, low-interest loans to small businesses. Another $64 billion in fraud hit the PPP, which dished out loans to small businesses, individuals and nonprofits that were “affected” by the pandemic.  

“About 1.6 million EIDL loans worth $114 billion are either past due, delinquent or in liquidation as of May, according to the report. More than 69,000 of these loans worth $3.2 billion have been written off. And more than 500,000 PPP loans have defaulted” —CNBC

The SBA was just one of many government patsies hit with major fraud during the Covid-19 welfare orgy. In September, the Department of Labor OIG said some $45.6 billion in unemployment insurance was devoured by thieves whose handiwork included using the Social Security numbers of 205,766 dead people. 

The Department of Agriculture was hit by one of the largest single scams, with more than 40 people linked to a Minnesota non-profit called Feeding Our Future charged with plundering $250 million from a program meant to feed needy children during the pandemic by operating upwards of 250 fake meal-assistance locations. 

We all pay the price of the government’s Covid-relief incompetence, as the hundreds of billions of stolen money was created by the Federal Reserve, sapping everyone’s purchasing power and imposing what is ultimately a stealth tax with no maximum rate. 

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Main Street America Republicans have a plan to rebalance these grossly mismanaged government outlays – on behalf of the hard-working, God-fearing, tax-paying U.S. citizens whose tax dollars went up in Covid relief smoke.

The Leviticus 25 Plan is a dynamic economic initiative providing direct liquidity benefits for American families, while at the same time scaling back the role of government in managing and controlling the affairs of citizens.  It is a comprehensive plan with long-term economic and social benefits for citizens and government.

The inspiration for this plan is based upon Biblical principles set forth in the Book of Leviticus, principles tendering direct economic liberties to the people.

The Leviticus 25 Plan – An Economic Acceleration Plan for America

$90,000 per U.S. citizen – Leviticus 25 Plan 2023 (6524 downloads)