Apply for bankruptcy protection!, Biden had high hopes! The situation of this giant | Protagoras | Biden
The July meeting minutes released by the Federal Reserve this week indicate that the Fed may need to further raise interest rates to curb inflation. In a high interest rate environment, the operating profits of the US real economy are being squeezed, and the pressure on operations is gradually increasing. According to data released by S&P Global Market Intelligence, the number of large and medium-sized US companies filing for bankruptcy in the first seven months of this year has exceeded that of the entire year last year.
Data shows that in the first seven months of this year, the United States received a total of 402 bankruptcy applications from large and medium-sized enterprises, exceeding the total number of applications from last year.
Entering August, the trend of US corporate bankruptcies remains undiminished. Electric bus manufacturer Protella filed for bankruptcy protection on the 8th of this month. In 2021, US President Biden also visited the company's factory through video, placing high hopes on the company.
The company stated in the application documents that due to high inflation and rapid interest rate hikes in the past two years, the actual cost of manufacturing cars in 2022 has been higher than the selling price at the time of signing the contract in 2021, and the company's car sales are actually in a loss. Due to government procurement restrictions, at least 70% of the company's products must come from the United States, which makes it more difficult for them to reduce costs.
The Wall Street Journal believes that this phenomenon is quite ironic, as inflation and regulatory costs under the Biden administration are offsetting the subsidies provided by its Inflation Reduction Act. In addition, many analyses have pointed out that the situation of Protara to a considerable extent reflects the current situation of the electric vehicle industry in the United States. Once regarded as one of Tesla's strong competitors, Lordstown Motors announced bankruptcy in June this year, and many manufacturers have suffered consecutive quarterly losses, causing their stock prices to plummet.
Chris Versace, Chief Investment Officer of Tematica Research in the United States: My concern is, as I mentioned before, whether interest rates will rise again, which means higher borrowing costs, which is a disadvantageous factor for car loans.
Not only American electric vehicle manufacturers, but also the non essential consumer retail industry, which is sensitive to interest rate changes, are in a difficult situation.
In April of this year, the bride of American wedding retailer David filed for bankruptcy protection. This company, with over 70 years of history, is the choice of approximately 25% of brides in the United States for weddings and has nearly 300 stores worldwide. In the application documents, the company mentioned several factors that led to bankruptcy, including supply chain chaos, changes in consumer behavior, and increased inventory and operating costs due to inflationary pressures. In addition, multiple retailers such as 3B Home Furnishings and Gathering Cities have also filed for bankruptcy in the past few months.
Pamela Danzig, President of United Marketing Corporation in the United States: American consumers are now experiencing an explosion in their credit cards, owing over $1 trillion in credit card debt. In my opinion, the environment that the United States will face next year is that regardless of whether there is a recession, we will be in a state of stagflation, and small retailers will face greater risks.
Many analyses have pointed out that the Federal Reserve's aggressive interest rate hikes over the past year have been one of the important factors contributing to the deterioration of corporate financial conditions and subsequent bankruptcy. Although the US stock index has been rising all the way this year, the real economy has actually hidden a crisis.
Matt Marley, Chief Market Strategist at Miller Tabak in the United States: One important reason for the stock market's rise this year is the banking crisis in the United States. This forces the Federal Reserve to inject a large amount of liquidity into the financial system, thereby boosting the market rather than being supported by economic fundamentals.
