Debt consolidation, a term coined by the United States’ most recent Fed chairwoman, has become one of the hottest topics in financial markets.
A number of companies, including Bank of America Corp, have agreed to pay down debt to avoid defaulting on the debt, while many other companies are also reducing or eliminating their debt.
While consolidation may seem a good idea in theory, the idea that the government can force people to consolidate their debts has some critics.
The U.S. is currently a country where people are still living in the pre-crisis economic times.
That has created an unprecedented amount of debt, which many people don’t want to pay back, particularly for mortgages and credit card debt.
A major concern with debt consolidation is that it could lead to a domino effect that pushes many Americans into the debt-collecting arms of lenders.
In a recent Reuters article, Daniel Schreiber, an analyst at Sanford C. Bernstein & Moring, argued that “a few billion dollars is an extraordinarily large sum of money.”
While debt consolidation may be beneficial in theory and may have a few benefits in terms of lowering the overall cost of debt for creditors, the reality is that a dominer effect can cause large, expensive defaults in the future, and that it would be better to avoid such a scenario at all costs.
Schreiber noted that the debt consolidation industry in general is dominated by large, established companies that have already incurred large losses and are trying to recover by paying down their debts.
“It’s a lot easier for the larger companies to pay off their debts and recoup some of the losses that they’ve incurred,” Schreib said.
One of the big issues that Schreibur said is that “companies that are struggling in the current economic environment don’t have the luxury of paying down debts, and they have to be able to do so at a time when their bottom line is really fragile.”
Schrieb added that the fact that “there’s a whole lot of consolidation going on, and people are having to make payments, is a huge concern.”
The article cited an August 2017 report from the Financial Services Roundtable, which said that the U.K. government has agreed to repay more than $600 billion to creditors and that debt consolidation will become the number one priority in the financial markets for the foreseeable future.
“There are a lot of problems with consolidation in the U, and the problem is the consolidation is going to be huge,” Schrieb said.
“You’re going to see a lot more consolidation in Europe and other places that have been consolidating.”
As of this writing, the Dow Jones Industrial Average has risen nearly 16 percent this year, with the S&P 500 having risen nearly 5 percent.