Credit markets took another small step toward their coming blowout when the Financial Times reported Monday (based on Merrill Lynch data), that the waves of withdrawals of assets from junk-debt (or “high-yield”) funds has now triggered a first wave of withdrawals from funds in the investment grade corporate bond markets. In the second week of an approximately $8 trillion outflow from junk, with three funds gone bankrupt and others on the edge, there was a $5.1 billion pullout from investment-grade corporate bond funds in the week ending Wednesday Dec. 16. The total $15.1 billion outflow from all kinds of taxable bond funds was called the biggest since a firm called Lipper began tracking this in 1992. Manifestly, that money was not going into stock markets, but into sell-offs of “good” assets to pay for losses on “bad” ones.

Debt bubbles and crises in these markets do not become crashes until they have pulled down the underlying economy into contraction. The oil price plunge, though triggered by Saudi power plays 16-18 months ago, has become a 70% drop because of continuously declining economic activity and global demand for fossil fuels, as well as many other industrial commodities. Now recession is biting including in the “recovering” U.S. economy.

The Commerce Department reported Dec. 18 that total U.S. business sales are set to decline by approximately 4% in 2015 vs. 2014. This is a purely recessionary development; associated with it is a very high inventory/sales ratio of 1:4, which has shown up even in auto, which has been the lone champion until now. And the Chicago Federal Reserve economic activity survey — this is the major regional survey, known as the Chicago Fed National Activity Index — showed economic contraction for the fourth straight month in November at -3.

Total U.S. industrial production in November was 1.3% lower than one year earlier, data that the Federal Reserve released literally in the same afternoon it announced raising interest rates. Auto assembly, the “recovery leader,” is still growing very slowly, but going into dealer inventories which have returned to 2008 pre-crash levels. In the large Canadian part of the auto industry, however, outright decline is underway. The Canadian government announced wholesale trade in motor vehicles and parts dropped (by 2.1%) for the fourth straight month in November; overall wholesale trade in Canada fell as well, by 0.6%, and this too was the fourth straight month of declines. Canada’s economy is officially in recession.

There are also sharp devaluations in the oil price collapse. The Canadian dollar fell to 1.42/dollar, a 22-year low. The Province of Alberta lost its AAA credit rating, being downgraded by Moody’s yesterday. The Kazakhstan currency fell by nearly 50% against the dollar after being floated! The ruble is again in the 70s/dollar range, although Russian oil production and sales are at or near record levels.