Alarm for the US economy: Record bankruptcies are fueling crisis concerns!

Alarm for the US economy: Record bankruptcies are fueling crisis concerns!

The economic situation in the USA is currently causing concerned voices and furious exchanges among economists. In particular, the recent bankruptcies of two US car companies, First Brands and Tricolor, cast a shadow over the stability of the American economy. Bank of England Governor Andrew Bailey has described these developments as a dire warning signal, noting that they could point to potentially deeper economic problems arising from a combination of high debt levels, rising prices and stagnant employment. az-online.de reports that Bailey's observations draw a parallel to the 2008 financial crisis, when many were concerned about the risks of subprime mortgages underestimated.

The situation is further exacerbated by the alarming number of bankruptcies. In the first quarter of 2025 alone, 188 large companies filed for bankruptcy, the highest number since 2010. This represents an increase of 49 bankruptcies compared to the previous year, intensifying concerns about the US's economic stability. The causes are diverse: rising interest rates, sluggish consumer behavior and the ongoing structural weaknesses of many companies are putting a significant strain on the economy, as deutsche-wirtschafts-nachrichten.de states.

Increasing risks in the credit market

Another circumstance that is weighing on the current situation is the growing debt burden in the USA, which will have reached over $35 trillion in 2024, which corresponds to 120.8 percent of gross domestic product. Although the Federal Reserve has relied on an expansionary monetary policy in the past, it is now facing increased criticism because this approach contributes to the indebtedness of many companies. Interest rates have been rising since April 2025, which poses a threat to the existence of many companies, especially those with weak balance sheets. Bailey likens the bankruptcies to a “canary in the coal mine,” underscoring the seriousness of the situation.

The prominent bankruptcies also include companies such as the electric vehicle manufacturer Nikola and the well-known chain of stores Joann Fabrics. The consumer goods sector is just as badly affected as the industrial sector. The number of bankruptcies will accelerate in the first quarter of 2025 and analysts fear that many business models that are not viable will have to disappear from the market. de.statista.com highlights that healthy companies are suffering from the pressure of supply chain problems, high financing costs and cautious consumer behavior.

Look at the forecasts

A decline in gross domestic product of 0.5 percent is forecast for the future. This dire prediction is accompanied by negative perceptions of the US economy, with over 60 percent of Americans feeling pessimistic about the economic situation as of the end of 2021. The unemployment rate was around 4.1 percent in 2024, while the employment rate stagnated at 60.1 percent. This suggests a tight labor market.

Current developments in the USA are putting the question of economic stability and the government's future ability to act to the test. It remains to be seen how policymakers respond to these warning signs and whether they are prepared to act before the “canary” scenario becomes a reality. In any case, the worrying figures and forecasts should ring alarm bells, especially among those who ignored the signs of the last crisis.