Hard Times For The Economy; No End In Sight

March 17, 2010

Hard Times For The Economy; No End In Sight

Well it looks like 2012 is going to be more than just a disaster movie. 2012 is also the beginning of a 3 year period during which more than $700 billion in corporate debt comes due. With these huge bills about to hit both the government and corporations at the same time many companies are going to have a hard time getting new loans, which by default will provide the economy with an abundance of loan defaults and bankruptcies.

So here it is 2010 and one must ask what are the government and the corporations doing to prepare for this? Is anyone putting back funds to make these major repayments or is it business as usual? We’ve already seen the devastation of the credit crisis on private equity firms and non financial companies that until 2007 were able to easily borrow. But the credit crisis for large corporations and the government isn’t going to hit until 2012 when the bonds and loans that were issues to bail them out in 2007, carrying them through the credit crisis come due.

The credit markets have slowly returned to normal since the 2007 crisis, people have become more confident in the economy and the recovery taking place in the United States, but the question is can our tenuous economy handle this coming surge in the demand for credit. These corporations are going to be seeking to borrow from Peter to pay Paul and many of them are not going to be able to obtain the funds they need.

Many of these corporations with huge debts to repay in 2012 aren’t producing enough income yearly to even cover their interest on these loans. So is 2012 going to be the end of the world? Maybe or maybe not, but one thing is sure, there will be a huge upheaval in the economy and not in a good way. When our own government faces having to borrow more than a trillion dollars in 2012 due to $859 billion in old bonds becoming due in addition to the national deficit, there’s not much hope for these corporations or for our general economy.

The government and the corporations should have been preparing for and planning for this event ever since they obtained the loans that are going to be due in 2012, but as always the United States is spending more money than it has, financing several other countries, large greedy corporations and basically wasting the money that should be used to pull the U.S. out if it’s financial decline and reestablish us as a world power. Are we the richest country in the world or just the country with the most debt?

Publisher: Salient News