Janet Yellen Needs to Brush Up on Her ABCT

“I am feeling very good about that prediction,” Treasury Secretary Janet Yellen told Bloomberg when asked whether the U.S. would avoid a recession while still containing inflation. “I think you’d have to say we’re on a path that looks exactly like that.”

Tell that to the 39,000 Americans who filed bankruptcy in August. That number is an 18% increase from a year ago and with unemployment now just 3.8%, imagine when more people are laid off with over $1 trillion in credit card debt outstanding.  

At the same time commercial bankruptcies increased nearly 17% in August compared to July, reports Fortune.com, marking the 13th consecutive month that total bankruptcies, including families and individuals, have logged year-over-year increases, according to the American Bankruptcy Institute.

Chapter 11 filings surged 54% from the same month from a year ago. US bankruptcy courts recorded six new, large filings ($50 million +) last week alone. At least 23 big filings happened last month. The jump in business failures, especially for big firms, is clear, Ed Flynn, a consultant with ABI who studies bankruptcy statistics told Fortune. “I think a lot of it is interest rates,” said Flynn. “There have been an unusually large number of large cases.”

If that’s the case more bankruptcy filings are on the way. The September 11th treasury note auction produced the highest yield since before the great financial crisis, 4.66%. 

“Treasury yields also have also been pushed higher by growth in the supply of new notes and bonds to finance the US government’s widening budget gap. The three-year tenor increased by $2 billion this month and last month,” Elizabeth Stanton reported for Bloomberg.

If Secretary Yellen was familiar with the Austrian Business Cycle Theory she’d know the ongoing increase in interest rates means the landing will not be just hard, but historic in its brutality.