Beware the mother of all credit bubbles

– News about the economy covered by Quincy Quarry News with commentary added. 

 

Tsunami on the horizon?
Image via the Washington Post

Beware the mother of all credit bubbles.

 

Recall those heady days of 2006 when home prices were rising ten, fifteen and even twenty percent a year, allowing millions of homeowners to refinance mortgages and collectively take out more than three hundred billion dollars in cash given the increased value of their properties befort things hit the fan?

 

Guess what: twelve years later, such refinancing looks to be happening again.

 

This time, however, it is not households taking advantage of cheap debt to take cash out of their overvalued homes.

 

I’m in the money …
A ThePeoplesVoice.org graphic image

Rather, it is giant corporations using cheap debt — and a one-time tax windfall — to take cash from their balance sheets and send it to shareholders in the form of increased dividends and, in particular, stock buybacks.

 

While a somewhat complicated discussion, the full article upon which this Quincy Quarry has excerpted highlights is worth a read and maybe even a few reads so to properly appreciate the concerns posed in it.

 

After all, the economy has crossed into historic territory for a bull market to run and history has shown that what goes up eventually comes down.

Source: Analysis | Beware the ‘mother of all credit bubbles’

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