I am relatively uneducated in this particular aspect of finance and it's supposed current risk to global economics. That being the corporate bond market. So I'm here to see if anyone can offer some insight in regards to what role it would play in a coming recession.
Yes everyone talks down about Wikipedia haha, but nonetheless, this apparent major risk to the world economy even has a large Wikipedia page devoted to it's purportedly probable negative impact to the world in the future.
I read the Wikipedia article, then went on further to research and confirm things that were mentioned in said article. I won't list them all here because I am personally just asking information from people "in the know" about exactly how it could all come crashing down. If you were unaware, like I was, feel free to google "corporate debt bubble" and it is the first thing that comes up.
There were many things that on the surface seem troubling to read about. However I don't know enough about global economics to actually make an educated guess on how things will play out with regards to this issue.
Is it simply that an unforeseen recession could cause these companies to lose revenue and therefore not make their interest payments and lead to a huge amount of bankruptcies which would in turn obviously increase the magnitude of that recession massively? That's the general gist of things which I took from the issue.
I also couldn't exactly figure out if the corporate bond market itself could be a potential cause for a future recession and it was somehow perhaps similar to the mortgage crisis. I believe there are corporate bond CDOs being traded, just like the mortgage CDOs. However I'm not sure if there are secondary markets on top of that which could up the risk by orders of magnitude like the synthetic CDOs did back in 2008.
So basically if there are people out there who have a very good grasp of the state of corporate debt and how it could come crashing down, and exactly how that would impact the world, then I'd really like to hear your opinions on how and what you think might happen in the future.
