Corporate Debt, Cryptocurrencies & The Next Financial Crisis

By Patrick Tan on ALTCOIN MAGAZINE

While the last financial crisis was lead by mortgage debt, the next financial crisis will likely be lead by corporate debt and it is unclear if central banks will have sufficient tools in their toolkit to solve the next crisis.

As the world hurtles into the first quarter of 2019 and the U.S. government continues on its longest shutdown in history, corporate earnings season is in full swing.

During the last financial crisis, one of the immediate consequences of Lehman Brothers’ bankruptcy was that the market for corporate paper (or credit) that was actively traded between banks dried up.

Overnight, companies found themselves unable to make payroll, pay suppliers, pay for transport services — all the key processes needed to keep businesses rolling, had ground to a halt.

But companies soon learned from the lessons of the financial crisis.

As central banks slashed interest rates to near zero or negative interest rates at times, companies found that commercial banks were no longer reliable counterparties for corporate paper.

And given that investors took advantage of massive amounts of liquidity flooding the market, the search for yield…