Commercial & Industrial Loans Are In The Danger Zone

I am fully aware that both C&I loans and corporate debt may reach a higher percentage of GDP in this cycle due to how low interest rates are. Still, it is important to be aware of the risks that are building up and not be complacent. When the Fed and other central banks hold interest rates at low levels, they create market distortions and encourage malinvestment or unwise lending decisions that would not otherwise occur in a normal interest rate environment. These malinvestments are revealed once interest rates are raised and the economic cycle turns (read my piece about this in Forbes). A tremendous amount of malinvestment has accumulated after a decade of artificially low interest rates, which is going to result in serious pain when the cycle inevitably turns – make no mistake about that.

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