The Economy

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Here was the article he was referencing in the Journal, if you want to read it: More Startups Throw in the Towel, Unable to Raise Money for Their Ideas

 

You have to look at the complete picture ... The company is down to $344 million in sales. ... and has close to $400 million in non-bank debt, which typically has higher interest rates than bank debt. They are rated as junk debt. They essentially leveraged up the company when interest rates were being suppressed by the Federal Reserve, and then the Fed pulled the rug out from under them when it raised rates 500 basis points in 15 months. They were fine when they could keep refinancing their debt at artificially low rates. ... they are toast now that the shadow banking lenders they were relying on won't touch them anymore.

 

BTW. ... get used to stories like it.

One of two things happens now. ... Either:

1) The Fed stays put (what it did yesterday) or keeps raising rates and even withdraws some of the massive liquidity it injected into the economy by letting bonds roll off its balance sheet, and you get a cascade of companies that have been living on cheap, mispriced debt going bankrupt, or
2) They see things breaking and panic and behave the way they always do, and deal with a debt crisis they caused in the first place. ... by distorting the debt markets more to stop the bleeding. If they do that, in the process they will create an even bigger debt crisis later on (what they have done in a series of fits and starts over the last decade), and because they let the consumer price inflation genie out of the bottle, rising prices will continue to be a problem and eat up the poorest people who get hit by it hardest.