What Will Cause The Next Recession – Mark Zandi Says Corporate Debt

2020 is the day of reckoning. If there is a day of reckoning that’s when the economic expansion will end and a recession will ensue. No recession in 2019. In large part because we do have more fiscal stimulus in 2019 it’s mostly deficit financed increases in government spending and that allowed a lot to growth. And also we’re in a self reinforcing virtuous cycle. Lots of jobs low unemployment wage growth is accelerating. Supporting more consumer spending which is causing businesses to hire which is pushing unemployment down so we’re in a very virtuous cycle. But it can get broken. And in my view that probably would occur in 2020 so if I had to pick a date for the next recession it would be sometime in 2020. By 2020 there is no more fiscal stimulus it’s all gone unless Congress and the Trump administration get it together and do something else. But given the politics here I doubt that very much. And also by 2020 interest rates will be higher. The Fed will have raised rates of several more times. That’ll put pressure on interest sensitive sectors of the economy like housing in the vehicle sector. And you know I do think there are imbalances developing in the economy and financial system more broadly that will become exposed as the economy growth slows and interest rates rise. The most obvious is non-financial corporate debt so called leverage lending. That is a problem and I think that will become more obvious as we make our way into 2020. So if I had to identify the thing that does this economic expansion in it will be high leverage over borrowing in the corporate sector. You’ve got some companies multinationals doing fabulously well. You know the tech companies a lot of the healthcare companies pharmaceuticals they got cash everywhere and they’re fine no problem. Balance sheets very strong. Then on the other side of the distribution you’ve got companies that are highly levered and a lot of it’s related to engineering. You’ve got private equity firms and other nonbank entities coming in leveraging up these companies trying to increase the returns to shareholders through the leverage. So if you add up all of the debt issued by companies that are already highly leveraged it’s comes close to two point eight trillion dollars worth that. That’s a lot. And if you get into an environment where growth is slowing sales growth is slowing. Interest rates are higher so interest payments on that debt are rising. It’s going to put a lot of pressure on those companies because they’ve got a Hobson’s choice. Do I make my debt payment or do I cut back hiring. Do I cut back investment. In most cases they’re going to have to cut back on hiring and investment. Of course that’s the fodder for a recession. I think the Trump administration’s economic policies are significantly dangerously misplaced. The federal government is borrowing hand over fist the debt load is ballooning as we use that money to pay for tax cuts and increases in government spending. That’s only temporary and it provides juice for a short period of time and then it goes away. But of course we’re left with the higher debt loads. Now here’s the thing. Deficits and debt don’t matter a whole lot in any given year it’s like climate change. We know climate change is a real problem and if we don’t do something about it it’s gonna be cataclysmic. We don’t know exactly when the crisis is going to hit but we know it will if we don’t change something. That’s exactly what the fiscal situation is if we know it’s a problem. It’s already hurting the economy. We don’t know when it’s gonna send us off the cliff but we better do something before it does. And then we also have the Trade War which you know feels like it might be moderating. But who knows. I mean if that escalates any further it’s already doing damage to the stock market and to the broader economy it will do a lot of damage. So the economic policies that the administration pursuing is doing damage to the economy and that’s going to become increasingly more obvious as we move through 2019 and 2020 and that’s why I think 2020 is the day of reckoning. If there is a day of reckoning that’s when the economic expansion will end and a recession will ensue.

100 thoughts on “What Will Cause The Next Recession – Mark Zandi Says Corporate Debt”

  1. man this was all really orchestrated by people who are lining there own pockets with our tax dollars ha

  2. I chuckled when he said the slave labor immigrants we have in Americas kids are going to be the best and brightest lol

  3. This video literally had to be made because the american born debt slaves are at there limit.

    Pushing immigration so the ponzi scheme can add new members one by one, sick and twisted if you ask me but if all you see is dollar signs instead of souls this is a genius plot.

  4. so the government told people to buy homes and get a college education, because putting them in 100k debt is beneficial to there future.

    When at max capacity and the debt ceiling is hit and you've ran out of suckers for your ponzi scheme you rake in the money that you put out in the first place. The best part is you only lend pieces of paper, but people use that to build actual wealth like homes, cars, etc. When everything is built and done that is when you strike like a cobra. Making america default on there debts YOU told them to get so you end up with all the assets. Genius but very wicked. See you at armageddon

  5. We should close our U.S. Borders. Build a wall 50ft. High, and 2000 miles long along our Southern Border. Then we should ban the Spanish language in the U.S. property. And we should stop all immigration. We have 300 million people here already. We don't need more people. We can work with what we have. Stop diluting our population. We can reproduce from within. Then we can force the German language into our schools, and move toward a German speaking Nation for the U.S.

  6. Corporate debt are scams. They get all the bailouts and than bail with the money stolen from TaxPayers. Corporate gets Socialism and hard Capitalism for the rest.

  7. The war is planned to allow tech firms to leave the US and move to Israel to tries to position himself in the middle of the one belt one road Americans are in deep sleep watch how one behind the other tech-company moves from the US to Israel and you still think the trump wants to return back jobs to the US he wants to send jobs to Israel many owners of tech company need reason for the public why they move and the real reason is they want Israel to be the ruling country they have to throw the American economically on their knees to succeed the Chinese know about the plan and are not so concerned. Everything else is a shame for the American public. The media will not Show that facebook Microsoft and much other head office are in Israel and many other tech-company is in the process of relocating

  8. No depression until 2030 when social security goes bankrupt massive austerity measures then student debt will be so high all debt will grow 50 percent next 11 years 2030 total economic collapse worldwide 2031 world war 3 food shortages will spark the war that my prediction.

  9. Smart guy willing to speak to TRUTH about the immigrant's contribution to America's twchnological edge… The current negative immigrant attitudes will destroy that advantage.

  10. America started going downhill the moment that Congress passed The Immigration Act of 1965. It opened the floodgates, and allowed all of these people from the third world to start flooding into America. The irony of it all is that the American people were opposed to changing the immigration laws at the time by a two to one margin. So much for abiding by the will of the American people. Lyndon Johnson signed it into law on October 3, 1965. The American people have been living with the ramifications of that one single thoughtless act ever since. When you import from the third world you become the third world. For every action there is a reaction.

  11. We do not need more  IMMIGRANTS …………..We do need more good paying jobs. We do not need 1% making 90% of the money. It seems to me this guy would say send all the jobs overseas,,,,, O that's what we did.

  12. This guy’s whole point seems to be that nobody knows the day or the hour.

    And I think he’s leaving something out that might make sense out this mish-mash. Maybe his anti-psychotic meds?

  13. Would not bringing in all the non us citizens and putting more people in the same amount of colleges rasise the price to attend these colleges? This might be a thought on what is causing this student loan debt crisis for Americans.

  14. He is wrong about his immigration theory. We are flooded with immigrants many don't speak the language, they are in our jails and destroy every city they take over. They have run California into the dirt. We have all the immigration that he could ask for. The places with the most immigrants are the poorest places to live and have the fewest jobs, they make crime worse than ever. This is dragging us down not helping us. Mexico has these people and it is so poor, it should be the richest place in the world if what he thinks is true.

  15. I watched a technical college cut coarse that would provide carpenters, electricians, brick layers and auto mechanics because they could fit more people in a computer classroom and the college could make more money. Never mind those getting out of the college could not find work and when they did it was just above minimum wage.

  16. The reason Gov is allowing in immigrants is because businesses need more and more consumers each year to finance their increasing growth. 65 million baby boomers retiring and dying. They need to be replaced. Even it it's by low educated, low skilled people.

  17. Mark Zandi and Moody's position…
    1. Immigration is good! = killed u.s. wages; enriched corporate capitalists.
    2. Trump trade war bad! = 40 yrs. of free-trade sending jobs oversees was good!

  18. So we should bring more immigrants who will take full advantage of our welfare system? That’s supposed to solve debt crisis? There’s already plenty of Americans who need jobs.

  19. Right all immigrants are awesome. Let’s just let everyone on the planet into our country and then the economy will be booming.

  20. I was listening to this guy until he said that we can stop the "Sun cycles" – the fake climate change – money grab. B.s. propaganda.

  21. So corporations just got themselves a yuge tax break and still manage to rack up corporate debt. Meanwhile, their CEO's are laughing all the way to the bank.

  22. All the above talking points are valid. The Federal Reserve diluted the massive debt in 2008 by a flood of money—-increasing the money supply and forgiving loans. Now trump for political reasons expands it through leveraged indebtedness in the future for a quick stimulus. The debt is heavily financed by China purchasing our public debt. Now trumps picks a fight with our two biggest trading partners and the American consumer pays these taxes when the products enter the country. NOT EXPORTING COUNTRY!!!! So the indebtedness we just added to our future will shorty be eaten up by sharp tax increase on consumables. Yes political decisions seriously affect economic activities in the general population. They go hand in hand and they are delegated with this authority when smart and morally guided people lead. Trump is a degenerate and morally bankrupt character who will leave this nation financing stressed in mammoth debt just like his companies. Its very suprising the core of followers who openly can not see this man. For what he is. But his children are going to jail for his crimes and theres likewise too.

  23. He suggest increasing education supply to lower cost ? Maybe price regulation or public and free university is the better option. No more debt.

  24. The employee shortage will be filled in by the jobless from the projects and low-income states. poverty will equalize itself eventually and taking in more immigrants than a country needs is called saturation. If you don't understand saturation, it's basically if your food is too salty or just the right flavor. To make young people blossom, look at the German education/tradeschool system.

  25. THE "DEBT BOMB" WILL CAUSE THE NEXT RECESSION. Consumer spending drives the US economy, and consumers are "tapped out" – maxed on their credit cards, and NO cash on hand. The "retail apocalypse" has resulted in huge lay-offs, along with downsizing in the auto industry. People existing on Food Stamps, Welfare, and working in minimum wage jobs have NO disposable income to buy non-essential goods. Despite this, retailers continue pricing their products TOO HIGH for most budgets. The same applies to the auto industry. DEMAND WILL "DRY UP" > MORE LAYOFFS & CLOSURES > "DOMINO EFFECT".

  26. This video must get revised, because in the past five months both FED as well as US Govt. changed thier stance

  27. You Sound Like A Fool… Educate Americans, Homeless, & Poor…You Are For Immigration…But Not For Poor Blacks…Stop The Fake BS.

  28. The fact moody still exists is a testament to the corruption in government and their owners private companies

  29. The guy wants mass migration to increase GDP….mmmkk bud, lets let them all in so we can have socialism you damn idiot.

  30. Crazy talk we don't need more immigrants! 4 words; robotics, automation and artificial intelligence!

  31. He's the first US Economist who actually acknowledged that climate change is a problem and we need to do something about it. And then he switched gears again and focussed on debt.

  32. All these problems have been around for decades and have gotten worse each time. That's true. But the last three recessions were triggered by high-risk investments of the financial investment sector blowing up.

    2008 – subprime mortages in mortgaged backed securites
    2001- dot com bubble
    1987 – junk bonds and risky savings and loans.

  33. You're the problem mate . You and your filthy system of , robbing from the poor and channeling the plunder into your corpulent bank accounts .

  34. Immigrants work and drive billions into the economy without even benefiting from it but Right wing minions would tell you contrary.

  35. Student loan debt, consumer credit card debt, and vehicle loan debt combined are way higher then 2.8 billion in corporate debt. The three things I just listed hold a bigger problem. Most students take on more debt then they need/ can handle. People are using credit cards for things they don't need and hold no value. And people are buying cars that go down in value and take out a loan that they pay interest on. This is a much bigger problem then business trying to grow using leverage. People have not been taught financial education in the school system. We have way too many people going to college that didn't need to in the first place. Then they come out at a huge disadvantage financially with a huge loan attached to them. 88% of these graduates never find a job in the line of work they recieved a degree in. They could have taken those years to find a job, start a business, shadow at the place they want to work…. Thanks. Rant Complete.

  36. He was doing well until he became a climate change, immigration, and higher education expert. You look at the trends where they are heading not where you want them to be.

  37. The USA is going to allow massive amounts of poor people to immigrate into a country that is loosing jobs, That is a reciepe for disaster. Automation is going to replace a large percentage of jobs in the future, and this nut case wants massive amounts of imigrant here in the USA. Must be a democrat.

  38. 1.2 T additional gov debt each year. That's every person borrowing 4 k a year and giving it to the government (yep, 40k over the last 10 years). This is like borrowing 4k on our credit cards to take the family on a Disney cruise when we have no money to pay for it. It "looks" good until we get home from the cruise and look at our credit card bills that come month after month. Then repeat for 10 years in a row never making a principle payment. ! Why borrow in good years when we will certainly be having to pay back in dire years (wars, national disasters, global warming remediation, recessions)?

  39. You stupid Baby Boomers should have saved for your own retirement like responsible adults instead of relying on government aid. That would have been ideal if your idiotic generation took some responsibility for selling out this country for your own selfishness.

  40. lolllllll, well, prices keep going up…crazy housing prices here in Canada…up 200, 300, 400 % over the last 18 years, all across the country…makes no sense at all…crazy bubble with no end in sight…what recession, where…?

  41. The Day of Reckoning?

    The sell-off begins tomorrow. But but I’ll give you all until Friday to get your cash out of the banks….

  42. very few have realized how we all depend on the. fragile system..

    even the unibomber got goods from 'town'. .. nobody is 100% off grid… the physical grid… Maybe the electric grid..but not the goods/services grid… fragile as it may be, we are all dependent on each other…

  43. You are a fool sir. We do NOT need more illiterate peasants coming here in need of medical care with little skills to raid our treasury. Just like a championship ball team, WE sir get to pick the best players for our team.

  44. Lot ,., lights,.the bites, ., na no ,., now ,., bits to come ,.pico s ize,., mat er stuck,., clep si dra i2 ,., A?,., as long as some one left to swich off the lights ?,.when leave the room,., which room,., leaking slowly,., bits or bites from c to si,., c si c si c si,.,.

  45. I find when the experts tell us everything is going well, we should be nervous & when they tell us things will be bad , everything is fine….I know there lying to us all. They make money even when there's a resession Because they know how. It will only hit middle class investors

  46. Best and the brightest,i think its the dollar as reserve currency,every one have to trade in dollar,if the dont like it,sanctions war!

  47. I say a 'run' on a NATION … Italy, Ireland, Spain. U.K. one of those.

    The U.K. is a good candidate?

    But 2020 could be too early.

  48. TRADE WARS are strangling the world economy; the first casualty is the loss of the EURO. This causes WAR to appear between the EU and Russia.
    People ask me "How long is the Great tribulation?" It is a five- month cataclysm, as seen in Revelation 9: 5, 10 which corresponds to the 150 days in Genesis 7: 24; the Great flood of Noah. Matthew 24: 37. At this time, the wicked are destroyed, as seen in Psalms 92: 7 and Psalms 37: 8-10; and this brings the Great tribulation to an end. The survivors are found in God's Kingdom, at the appearance of Christ; at the beginning of the crisis, as seen in Matthew 25: 31, 34. That is why the faithful are protected; and will survive John 3: 16
    Declare "Peace and security!" in Israel; apply maximum pressure to Iran, and watch the 'sudden destruction' Daniel 11: 44, 45 1Thessalonians 5: 2, 3. Jehovah's Day arrives 'like a thief in the night' 1Thessalonians 5: 2. Places in battle and distress at this time are: Gaza, Ashkelon, Ashdod, and Ekron. Zephaniah 2: 1-11. Christ told us to 'get out of Judea' at this time. Mark 13: 16.
    The worldwide financial meltdown Psalms 46: 4-6 Revelation 18: 17 Ezekiel 7: 19 that comes with wars Jeremiah 25: 24-26 and worldwide wrath Revelation 11: 18 also means that the time of man's rule over man is OVER Romans 9: 28. Now, CHRIST RULES Matthew 24: 29, 30 and survivors are found in God's Kingdom, when He arrives. Matthew 25: 31, 34. "Come, you people! Buy wine and buy milk without money and without price!" Isaiah 55: 1. YES INDEED; they STUFF it, and YOU will SEE it happen.

  49. Under Obama the federal government borrowed and spent a tremendous amount of OUR money and the economy barely moved. Businesses were very apprehensive about the Obama administrations policies (which favored his like minded friends). Trump gets elected and the economy starts to climb and continues. This guy says his policies are dangerously misplaced. We're paying for the tax breaks? Government always seems to think THEY must get what they want and leave the actual tax paying "producers" in society to fend for themselves. I wonder what he would say if Obama was still in office?????

  50. Looks like his guy was completely wrong about the Fed. Fed is lowering interest rates. They raised it too fast last year. Scared everyone to death .

  51. I think we should restrict all the immigrants and deport the ones here because then after a few months of no servers, hard workers, ppl doing the hard work that no one else will do, see how life would be without these ppl making our lives better and see all the racists turn around real quick!!! We don't deserve these ppl! We treat hem like garbage and they make our lives better!!!

  52. 4:35 WRONG! Us stops undocumented migrants. Migrants can come as long as they have green card. What kind of country wants migrants without documents and bacground check. He can even be a cartell member

  53. He says the fed will have raise rates several more times by 2020. Didn't happen. More immigration is the solution to our funding challenge with Social Security? That's mixing topics. There's a lot of mixed stuff in there, its almost like he wants to run for office. The China tariffs in my opinion are completely appropriate, no one's stood up to them in decades.

  54. Interest rates headed higher in 2020??? Are you on LSD, or just a pathological liar?! We are heading for nominal negative interest rates here in the US, you clown. Europe is already there.

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