The Transformation from Equities to Debt: A Precursor to an Economic Collapse?

“Since the mid-1990s, the number of companies listed on US stock exchanges has been steadily shrinking. There are currently just over 4,000 companies listed, up from the 2012 low but way down from a peak of more than 8,000 in 1996. Europe has not been immune; only 84 companies have listed this year, the lowest in a decade and the lowest by deal value since 2013. European capital markets have always been less equity-centric than the US, but even here the number of listings has shrunk by 29 percent since 2000. “—Colin Lloyd

Source World Bank

This is an interesting trend further demonstrating how debt financing is a favorable means of acquiring capital for firms during this economic environment of historically low interest rates, as Colin Lloyd explores in his article. He also touches on how this use of debt has increased profits for many firms, as this makes sense if they are purchasing equipment for cash flow.

The concern: Since interest rates are artificially set too low, (price fixing of the interest rates) it could set off a market correction in the debt security market. With the Fed gobbling up Treasury Bills, and engaging and repos from banks of their debt, all of these factors lend itself to an interesting market correction…maybe. Of course, these monetary policy measures are being done to stabilize inflation and encourage consumer spending. It’s quite unclear that this strategy is working. One thing is for sure: The consumption of debt has skyrocketed.


For the man that is working saving for retirement, good luck.

Read the rest here: https://www.aier.org/article/the-giant-debt-for-equity-swap/

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