by Wolf Richter
Leaving ugly skid marks on the economy, banks, and investors.
The “end of the credit cycle” is a harmless-sounding moniker for an era when defaults and bankruptcies suddenly re-materialize, as if out of nowhere, and when investors get to eat big losses in what they thought were conservative investments.
It’s when new money for Corporate America gets a little more skittish, and credit just a little tighter – not all at once, but over time. And for over-indebted junk-rated companies, that slight tightening and the accompanying rise in rates at the top triggers liquidity crises, defaults, and bankruptcies at the bottom.