Taking a close look at bankruptcy filings over the 22 years, we can see some rather unsettling facts. Our present problem is the consequence of policies that were set in motion well before the last two decades. I have spoken of those problems many tiresome times. From this post, while I allude to those problems, I leave it finally to you to draw your own conclusions.
The rot in Denmark has been spreading. While most see only a business cycle, we may perhaps be seeing much more.
The following graphs chart bankruptcy filings from 1986-2008, ending March of each year. With the exception of 2007, non-business filings have trended significantly upward, while business filings have trended downward. (Source for all data comes from the Federal Judiciary website. I did not use PACER; instead I used Judiciary excel and pdf downloads, putting the data into one spreadsheet.) A trend line has been added to each graph.
The 2008 decline in non-business filings is striking; the 2008 uptick in business filings is similarly interesting. Credit Slips, which used the PACER system to track total daily bankruptcies, projected (business and non-business) 2008 filings to be around 1.1 million for the year ending December. From that alone, we can safely say that for the year ending March, 2009, there will be a sharp increase in total filings, although it may not surpass that of 2006.
What may be the significance of all this?
Since 1986, the individual has been under increased stress. Business, on the other hand has done well.
The increase in population does not account for the increase in total non-business filings. Between 1986 and 2003, for example, total population increased 17%; total non-business filings increased 76%. Population growth cannot explain the increase.
Nonetheless, business filings have decreased. Do we have fewer businesses, as larger entities devour smaller ones? Or has business itself has just done well? I suspect both.
Even as GDP rose, the consumer (the individual) has suffered, a result, perhaps, of our credit bubble that has been a long time in the fashioning.
The economic focus has been on the consumer, keeping him an active mall rat. Apparently, his general wages have not been increasing fast enough to keep bankruptcies proportionally to the population.
Yet, as I said, business has done well, as have those individuals at the top of the food chain.
If 2009 is as dire as predicted, businesses will now be hit…and hit hard. That may drive non-business filings to new heights.
But still, the sharp drop in 2007 puzzles me.
Was it simply those at the lower end of the economic ladder finally being pushed over the edge; and that now many in the middle and upper middle range are ready to follow their poorer cousins? those whose debts make them likely candidates? Or was it a signal that the U.S. has run the course–and that now all manner of things will be well?
Frankly, I suspect the former: a significant new wave of bankruptcies.
Placing these graphs along side one of my favorites, net trade as a percentage of GDP, tells a worrisome tale.
For your delectation and without comment, I place it here once again.