US Bankruptcies are Already at 10-Year High as Pandemic Takes its Toll

The comments below are an edited and abridged synopsis of an article by Tyler Durden

Gold and silver sold off when Russia announced that it had a vaccine for Covid-19. This plays into the myth that a cure for the virus will cure the economy. But there is plenty of evidence suggesting the damage to the economy is deep and will likely have long-lasting effects, even when the pandemic abates.

US Bankruptcies are Already at 10-Year High as Pandemic Takes its Toll | BullionBuzz
A file folder stuffed with paperwork pertaining to bankruptcy proceedings. Shot with shallow depth of field.

For instance: Permanent business closures are rising; Americans owe billions in back rent; there is an increasing number of mortgage delinquencies; there is a rising number of over-leveraged zombie companies; a tsunami of defaults and bankruptcies are on the horizon.

In fact, bankruptcies are already on track for a 10-year high. According to S&P Global Market Intelligence, 424 companies had filed for bankruptcy as of August 9, exceeding the number of bankruptcies for any comparable period since 2010.

Bankruptcies have affected most sectors, but consumer-focused companies have been hardest hit. One hundred consumer companies have already filed this year, including big retailers such as J.Crew, Lord & Taylor, J.C. Penney and Neiman Marcus.

Analysts say they expect the pace of bankruptcies to continue, with retail and small businesses facing the most pressure.

John Blank, chief equity strategist for Zacks Investment Research, said that “brick-and-mortar retail is not gonna work out,” adding that airlines and regional banks with overexposure to retail could blow up without government assistance.

This undermines the idea of a V-shaped economic recovery. Even with a cure for Covid-19 tomorrow, the economic effects will likely drag on for months, if not years.

And yet, most of the mainstream seems convinced that with a little more stimulus and a vaccine, everything will be fine. But curing Covid-19 won’t cure the economy, and government help is only making things worse in the long run.

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