Discussion
US private credit defaults hit record 9.2% in 2025, Fitch says
FrustratedMonky: The US Ponzi scheme coming to an end. It works great while everything is going up.2008 Financial Crisis was triggered by Oil prices. There were lots of problematic structural elements that were fine if nobody looked close. Oil was just the sideway hit on the building to knock it over.Just takes a nudge to collapse. And here we go again.
persecutor: Go figure. Employers don't want to pay living wages or hire.
persecutor: Go figure. Employers don't want to pay living wages or hire anyone these days.
reliabilityguy: > 2008 Financial Crisis was triggered by Oil prices.Not by the subprime mortgages given to anyone with a pulse?
FrustratedMonky: That was the structural problem.But it was swept under the rug, it was hidden by market constantly going up.Ponzi schemes can hide in a market going up, because nobody is trying to pull money back out.Suddenly everyone wanting their money, and the shortfall suddenly become apparent.Oil prices suddenly made everyone try to pull money out, and 'woops there is nothing here'.
cmiles8: Private credit is cracking and lending standards are tightening behind the scenes. If you’re not building cash reserves right now you’re going to wish you had. The distressed opportunities ahead go to whoever kept dry powder while everyone else was chasing growth.If your business is light on free cash flow (ie everyone in AI at the moment) buckle up as there are storm clouds ahead.
coldpie: > If you’re running a business that relies on external cash (VCs, loans/bonds, etc) to keep things going things will get very ugly.Honestly thrilled to hear it. The AI bubble needs to burst so we can find out what's actually useful, start requiring real business models again, and get rid of all the noise and waste.
mothballed: Well it only took 5 years of destroying responsible savers with every policy imaginable to make sure they get crushed by those who availed themselves of the negative real rate loan inflation machine. How many people are left remaining that were dumb enough to take that strategy and are still standing? If you were operating on a cash basis for the last 5 years you were mostly wiped out by people leveraged to the 9s on debts and meanwhile your buying power was erased.
floatrock: I thought it was by the layers upon layers of interconnected unregulated derivatives valued at a few orders of magnitude above the underlying subprime mortgages given to anyone with a pulse.
alphawhisky: Now the subprime credit of entire cities is being sold bank to bank. I'd argue that's a direct escalation of the 2008 credit crisis.
bArray: https://web.archive.org/web/20260312130613/https://www.marke...^ Encase the link also responds with this for you: Access Denied You don't have permission to access "http://www.marketscreener.com/news/us-private-credit-defaults-hit-record-9-2-in-2025-fitch-says-ce7e5fd8df8fff2d" on this server.
jacquesm: This time it took ~35 blows with a sledgehammer. You have to be impressed with the degree of resilience here, even a chaos monkey like Trump has a hard time completely destroying the US economy even when all checks & balances utterly fail.
ToucanLoucan: Trump is a symptom, not a cause. One of probably hundreds of mediocre failsons gifted unbelievable wealth in the birth lottery who’s greatest achievement in life was managing to not lose all of it to his awful business acumen and utter refusal to listen to a single living person.Every industry’s leadership is full of trumps, many more palatable personally, many far better spoken, many even with better politics but none fundamentally are any actually better for society. They don’t understand their company, the products it makes, they have utterly no care for anything besides the quarterly stock price and their lack of care costs real people their jobs and ruins the products we use every day.And, they are why every company is ripping the copper out of its own walls instead of actually building a business that will last.
bargainbin: Luckily debt will be solved by the power of AGI, right? Just one more data centre! One more GPU! It can nearly write a basic three tier application with only 10 critical security vulnerabilities all by itself!Definitely think we’re in for a rough year financial prospects wise, and doesn’t even feel like we recovered from the 2008 crash properly.
cmiles8: Interest rates on things like CDs and low-risk bonds have been decent for a while now. It’s not been painful to sit on cash reserves provided you were smart about where the cash was parked.It’s not an either/or, it’s just a question of who was participating in the boom while preparing for storms ahead vs those all in on the boom.What implodes in the period ahead are things that are massively over leveraged and can’t absorb a hit without doubling down again with more funding/loans and such. These are the folks and companies that get wiped out.
uneoneuno: You're not wrong it's always good to have cash but certain allocations could have done 50%-100% return on investment while a CD brought ~5.5% for a while. Look at S&P since 2021. Knowing when to transition from cash, liquidity, other instruments is what kills/allows people to survive. We can't all do the same thing, it's almost as if it's economic ecological evolution, random death.
b112: Interest rates on things like CDs and low-risk bonds have been decent for a while now. It’s not been painful to sit on cash reserves provided you were smart about where the cash was parked.Just make sure you can unpark it, else you're SVB.
rvnx: Pretty sure the solution that US politicians will find will be to create new dollars out of thin air, so instead of increasing taxes they increase the money supply.Of course this is going to increase prices, but then they can blame China / Russia / Iran whoever is the scapegoat at that time.
tartoran: That’s a tax on the poor
bee_rider: It would cause inflation, isn’t that sort of a tax on people who have more wealth than income? (Which includes people like retirees, so, I’m not saying this is a universally good thing).
lenerdenator: We didn't recover from the 2008 crash properly because we didn't introduce consequences for those who created it.
SoftTalker: In fact we rewarded them. We bailed them out by printing a lot of money. We then printed more money during the pandemic to pay people to stay home and watch Netflix. Probably a lot more examples. All that money flowing around that has no basis in actual productivity or value created. It's got to correct at some point. One of the corrections is how much more everything costs now, but I don't think that has fully absorbed the excess.
hnthrow0287345: People have cried wolf or been wrong about incoming crashes and bubble pops so many times that this signal -- whether it's a good signal or not -- simply won't change anything I do.I'm sure someone somewhere could make a trade off of this article and this signal is definitely for them.
vmbm: It is incredibly hard to make money going short. Even if you are right about the direction, most short positions require interest payments to hold, or have some sort of decay built into the structure. So timing is everything and even then, if the underlying security slowly grinds down (instead of a quick abrupt move) you could still lose if the interest/decay on the short position outruns the downward movement on the underlying.I have been actively trading in the market for a little over a year now, and while winning on a short position is probably the most satisfying trade for me, the overwhelming majority of those trades are losses and at this point I mostly treat them as hedges. I suspect that is true for most market participants as well.
spacecadet: I mean people have been saying a crash is coming for years... Consumers recklessly purchased homes and cars at double their value, while relocating for remote work that was never long term in the eyes of their employer. Sounds like a receipt for disaster or a repeat of 2008- however, so much has changed since 2008... whatever happens, Black Swan! Hope "you" have your ducks in a row... As for AGI, lol. A box of matmuls isnt going to solve any real problems, so far, as you point out- is can barely write software. LLMs are basically gifted children. Smart sounding, lacking wisdom, chaotic, and likely just going to end up not that impressive. Either way- before we ever see AGI, we better get our heads out of the holes of the wealthy and enact UBI...
mikkupikku: Good thing our leadership is worried about the matters which really effect the lives of everyday Americans like... let me check my notes... prosecuting a war against a country on the other side of the planet which most Americans can't even place on a map. Very useful war, it was really important for Americans that gas cost twice what it did a year ago. Thank you, American zionists, for staying focused on what really matters.
bluGill: Even if this was a reliable signal for most of us it shouldn't change anyway. Timing the market is hard, so if you have a job keep investing in your retirement accounts and let dollar cost averaging work it out - odds are you are buying at fire sale prices. If you are one of those who lose your job - it doesn't matter much if the economy is good or bad, you need to adjust a lot of things (even in the best of times sometimes by chance you can be out of work for a long time)If you are the manager of a mutual fund you can take useful action on signals like this if you can figure out what they mean. Most people don't have enough money to be worth trying to take action.
bittercynic: You may not be able to properly let dollar cost averaging do its thing if you rely on your job to invest, since there's a high correlation between periods where people are out of work and periods where asset prices are lower.
wussboy: I would argue the second instance (pandemic) was much more nearly what a good government should do than the first one
bad_haircut72: No because assets hold their worth. Poor people have no assets
mothballed: Poor people are hit a lot harder, but rich still have to pay capital gains on inflation even despite having no real change in value. So the rich pay inflation at the rate * 0.2. Poor pay it at the rate * 1.0 (5x the rate of the rich).
bluGill: Even in the worst part of the great depression 75% of the people had a job. Most years where much better.Don't get me wrong, if you don't have a job things are bad. If you have a job but it isn't giving good raises, or it is a worse job than you are qualified for things are bad. However things are not hopeless for the majority of people even when things are really bad, and you can get through it.
alecco: The problem is all these over-leveraged sectors will drag everybody else. And guess who will be bailed out? Heads they win, tails everybody but them loses.
coldpie: Well, the good news is that's what good public policy is for, to blunt the impact of the damage with strong anti-trust enforcement and careful cash injections to weak-but-critical areas of the economy to help stabilize in rough times.Now, hang on for just one moment while I crawl out from under this rock and take a look at who we have entrusted to set our public policy.
SegfaultSeagull: This comment should be flagged for casting aspersions on a minority group.
hnfong: It's decent only if you believe inflation = CPIIn actuality, the CPI is lower than inflation because technological advancement, automation, and economies of scale (due to globalization etc) are driving consumer prices low. In other words, if factories are still producing things like they were 20 years ago, the CPI would have been much higher, and that higher number is closer to what should have been the inflation number.
JumpCrisscross: > if factories are still producing things like they were 20 years ago, the CPI would have been much higher, and that higher number is closer to what should have been the inflation numberThis is an impossible counterfactual to test. In reality, tracking value across time requires adjusting for immeasurable preferences. This is why inflation is really only a useful measure for personal purposes across periods of years. It’s only macro economically interesting across a generation and close to meaningless longer than a human lifespan.
SoftTalker: It may be what they should have done, but the effect was still inflationary. There is no free lunch.
SpaceL10n: I'm not surprised. Weren't we getting signals like 3 or 4 months ago that used car repossessions were ticking up? That's a breaking point for folks. The economic boulder keeps rolling and I'm not wearing any shoes. Spiking the price of oil is definitely going to help. This too shall pass?
hypeatei: Decent is fine if you're about to retire and want to avoid risk but I wouldn't recommend parking your wealth in CDs/bonds if your retirement is still 15+ years out, personally. The government has to print money to bail itself out which means things are going to inflate quite a bit, just look at what gold has done in anticipation of this.Banks bailed out the hedge funds in '98, then the taxpayer bailed out the banks in '08, then the government bailed out the taxpayer in '20... now monetary policy from the fed has to prevent the government from defaulting.
JumpCrisscross: > rich still have to pay capital gains on inflation“Pay” is doing a lot of work there. My house is half equity half debt. The debt gets to be paid off with inflated dollars. And I pay no capital gains on the appreciation. I can, however, tap it for liquidity if I need it.
mothballed: Rich people don't tend to have a sizeable portion of their worth tied up in their primary residence (and even then, IIRC there is a cap on capital gains exception), otherwise property tax would turn into a wealth tax for them which obviously they want to avoid. Non-primary residences still require paying capital gains. The inflated value you paid off with debt for a non-primary residence still gets captured as capital gain in the end when you actually want to sell the house for money.
franktankbank: Assets don't disappear they get bidded.
javcasas: I have been following this development for a couple weeks, and now it's on HN. How long until the elevator guy tells me about it?
tsunamifury: Most business is noise and waste. I love that no one gets that.It’s like hoping for the apocalypse thinking you’re of course the hardcore survivalist. When in reality you’ll get eaten first.
badpun: Consequences would be nice, but actually forbidding it for the future would be enough. Obama promised to do it, but didn't, and everybody kind of forgot and moved on.
CharlieDigital: > Obama promised to do it Do you know how the three branches of government work and who writes the laws?The legislative produced Frank-Dodd...which Trump and Republicans later scaled back...
tsunamifury: Wrong market
JumpCrisscross: You're right, thanks.
_ache_: What the hell ?! Nearly 10% ?! How can it be?! World wide, it seems to be around 4% since 2004.Page 22 (French but it's just numbers, you can read it). <https://www.eib.org/files/publications/thematic/gems_default...>
Ekaros: It is easy to keep your head above water level for surprisingly long times. Just look how some people in retail manage to rack up credit card and other type of debt.And it is especially so when money given is not their own, but instead they get to take cut. Which these funds can do. They might even just take promises that you will pay in future and even allow adding the interest on top of loan amount. Numbers look good, bonuses look good.Fundamentally this can only last so long and now is the time it starts to blow up.
JumpCrisscross: > it was by the layers upon layers of interconnected unregulated derivatives valued at a few orders of magnitude above the underlying subprime mortgages given to anyone with a pulseIt was interconnected derivatives and structured products linked to banks that caused a liquidity crisis in the former to cause a crisis of confidence in the latter.Meanwhile: "In the letter, Morgan Stanley said the fund wasn’t designed to offer full liquidity because of the nature of its investments, and that credit fundamentals across the underlying portfolio have been broadly stable. The bank's shares fell 2% in premarket trading Thursday" [1].[1] https://www.wsj.com/livecoverage/stock-market-today-dow-sp-5...
kryogen1c: > liquidity crisis in the former to cause a crisis of confidence in the latterWait what? Your thesis is the GFC was caused by a liquidity crunch/bank run? Isn't that... not true?Isn't the proximal to distal chain of events government encouraged subprime loans -> inaacurately valued MBS -> exponential, unregulated derivative instruments -> leveraged contagion. What does market confidence have to do with any of that?
JumpCrisscross: > your thesis is the GFC was caused by a liquidity crunch/bank run? Isn't that... not true?It's absolutely proximally true and it's not just my thesis. From Wikipedia: "The first phase of the crisis was the subprime mortgage crisis, which began in early 2007, as mortgage-backed securities (MBS) tied to U.S. real estate, and a vast web of derivatives linked to those MBS, collapsed in value. A liquidity crisis spread to global institutions by mid-2007 and climaxed with the bankruptcy of Lehman Brothers in September 2008, which triggered a stock market crash and bank runs in several countries" [1].> government encouraged subprime loans -> inaacurately valued MBS -> exponential, unregulated derivative instruments -> leveraged contagionThe subprime crisis shouldn't have been bigger than the S&L crisis [2]. What turned it into a financial crisis was the credit crunch that followed. That crunch was caused by folks running on banks that had sponsored these products.On "inaccurately valued MBS," note that the paper marked AAA mostly paid out like a AAA security. It would be like if you were perfectly good for your word and I lent you money, but then I wanted to sell on that debt to a third party who didn't trust you at a 50% discount. What does "properly valued" mean in that context? It's ambiguous in a dangerous way. (In this analogy, you wind up paying back the debt at face value. But years later, albeit on schedule.)[1] https://en.wikipedia.org/wiki/2008_financial_crisis[2] https://en.wikipedia.org/wiki/Savings_and_loan_crisis
lizknope: I've never heard the term private credit so I googled it.> Private credit refers to loans provided to businesses by non-bank institutions—such as private equity firms, hedge funds, and alternative asset managers—rather than traditional banks .Is that correct?So if these companies go under does anyone care? If they go under are they a systemic risk to the economy like the banks in 2008 that got a taxpayer bailout?
Ekaros: Two funny things:Banks have lend to these institutions as they couldn't lend themselves. Might be systematic risk.Lot of pension capital is tied to these vehicles. So they go under. Many people won't be getting their pensions in short or long term...
JumpCrisscross: Reason this number caught my eye: last year the Fed's stress tests found "loss rates from [non-bank financial institution] exposures (i.e., the percentage of loans that are uncollectible) were estimated at 7%, under a severe recession in scenario one" [1].That's the scenario in which unemployment goes to 10%, home prices crash by 33%, the stock market halves and Treasuries trade at zero percent yield [2].[1] https://www.mfaalts.org/industry-research/2025-fed-stress-te...[2] https://www.federalreserve.gov/publications/2025-june-dodd-f...
npilk: [delayed]
pragmatic: Exact opposite. We are in the midst of the COVID hangover.So that govt money went to the wealthy to buy up houses (Californians bought real estate in the Midwest as investments and it drove up housing prices along with small immigration to these states)Farmers etc benefited from bailouts when they were doing very well. It was a large blunder.
derwiki: This is not my field of expertise, but I modeled keeping cash reserves to buy distressed assets. Unless I was able to perfectly predict the crash, the outcome was still better to not time the market.
ycombinatornews: You have an elevator guy?! /s
alecco: And who buys those troubled assets at deep discount? Where do they get the cash to pay for them?
ifwinterco: There's actually (at least) three things going against you going short:- position has significant negative carry (what you're talking about there)- stock/bond prices are nominal and the government constantly prints the denominator so prices tend to go up even if there's no actual growth- for equities there is a genuine long term positive drift over time even if the denominator doesn't changeSo yes, it's hard to make money going short and timing is everything
hnfong: I think it's so obvious that no testing is needed, but generally I don't disagree with your take.The thing is one really needs to understand what "real yields" mean when investing in bonds, i.e. it means your purchasing power with respect to cheap commodities tracked by the CPI is preserved, but it doesn't necessarily mean "value" (whatever that means in the abstract) is retained.
corporate borrowers of private credit
rglover: Misleading title.> The default rate among U.S. corporate borrowers of private credit rose to a record 9.2% in 2025Emphasis added. Headline makes it sound like retail credit, not corporate specifically.
JumpCrisscross: > Headline makes it sound like retail creditI’m coming at this loaded with jargon, so excuse my blind spot, by why would the term private credit bring to mind anything to do with retail specifically?(The term private credit in American—and, I believe, European—finance refers to “debt financing provided by non-bank lenders directly to companies or projects through privately negotiated agreements” [1].)[1] https://corporatefinanceinstitute.com/resources/capital_mark...
rglover: That's not the likely definition most will reach for here automatically (especially amidst the constant financial blackpilling).
airstrike: [delayed]
Mattwmaster58: That's exactly where my mind went as soon as I read the title. HN rules say to "use the original title, unless it is misleading". I think the original title meets the misleading bar but I can't speak for other readers.
jasode: >, by why would the term private credit bring to mind anything to do with retail specifically?If a layman is unfamiliar that "private credit" is about business debts, and therefore only has intuition via previous exposure to "private X" to guess what it might mean, it's not unreasonable to assume it's about consumer loans."private insurance" can be about retail consumer purchased health insurance outside of employer-sponsored group health plans"private banking" is retail banking (for UHNW individuals)But "private credit" ... doesn't fit the pattern above because "private" is an overloaded word.
quentindanjou: Thanks, I completely miss-read it thinking that it was about retail credit. facepalm. Time for coffee.
hammock: I think you’re mistaken. We’ve been in a private credit bubble for a couple years at least, it’s in the finance/economic news every week and I’ve even started to hear regular NPR doing primers on it for normies. The term for “retail credit” is consumer debt or consumer debt. We don’t call it retail debt because the retailer is not actually a counterparty.Out of curiosity where do you primarily get your news?
NoboruWataya: > and, I believe, EuropeanYes.It surprises me that most people would read "private credit" to mean "retail credit" by default, but I also come to this loaded with jargon so I guess would defer to others on this. But to be clear, the title is not misleading to anyone who has any familiarity with the financial markets.
john_strinlai: it is correct, though.someone not knowing the definition != misleading title
kentonv: TBH "private credit" (meaning exactly what this article is talking about) is such a big thing in the finance industry that probably most finance industry people can't even fathom that the title is misleading to non-finance-industry people.I'm not saying they are right. But it's like if you posted an article called "Python Is Eating the World" on a non-tech side and people got mad because they thought the article was about a wildlife emergency. Fair for them to be confused, but maybe not fair to accuse the title of being misleading (at least not intentionally).
