Under Wall Street’s Bubble Collapse, the Economy Keeps Going Down

A fourth hedge fund appeared to be going down today in the junk collapse, as Avenue Capital Group (not Third Avenue Capital, which failed last week) — suddenly lost $1 billion and had to stop withdrawals from one of its larger funds. Avenue Capital Group is significantly larger, with $12 billion in total assets under management, than the hedge and mutual funds which have failed in the past week, and its demise presumably will take longer. According to ZeroHedge, it owns two mutual funds, etc., and it is run by a Bill Clinton personal friend, Marc Lasry.

Various market “experts” (vulture investors) such as Wilbur Ross and Carl Icahn have made statements that they see the junk credit collapse starting “to contagion” into the much larger investment-grade corporate credit market, whose debt values fell sharply from Dec. 10-14, followed by a “general rally” on Dec. 15.

The zero-interest debt bubble on which Wall Street has been feasting for years, continues to erode the real U.S. economy in 2015. More industrial contraction was shown when the Empire State Federal Reserve’s business conditions index for December (in New York and parts of New England) “rose” to -4.6 from -10.7 in November and -11.4 in October. Unfortunately, -4.6 is still a contracting industrial sector in that region. The contraction is now six months long, and with one month’s exception, has lasted throughout 2015. Labor market conditions showed the worst deterioration; the New York Fed’s employment sub-index plunged deep into job loss at -16.2, and the average workweek declined sharply.

The trend of contracting manufacturing across the country is virtually unbroken throughout 2015, with only the West Coast (as shown in surveys by the San Francisco Federal Reserve Bank) a partial exception.