US. Retirement Savings Will Suffer When The Current Debt Bubble Bursts
People with a lot of debt keep borrowing more, aided by lower interest rates and increasingly by lenders simply ignoring prudent rules. Those lenders can then bundle the loans and sell them to investors, who may not fully understand the large financial risks that they take on. This may sound like 2007, but this is happening in 2019. The only difference is that this time it’s companies loading up on debt, not households. The phenomenon is called leveraged lending, or loans to companies that already have a lot of debt.
When this debt bubble bursts, retirement savings for ordinary Americans will take a hit . Companies will more easily fail when the economy goes into a recession, exacerbating unemployment and people’s income losses. And many of the loans are ultimately held by mutual funds and pension funds that may have added a lot of risk with them. Their investments will suffer when companies fail and cannot repay their debt and retirement savings will decline.
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