Saturday, June 6, 2020

The Hertz Deflation Bomb

What is a lender to do when Hertz can't pay its monthly debt and files Bankruptcy

Flood the market with 568,000 vehicles it has collateral on to try and recoup its debt write-off.

What does a huge influx of supply do when demand shrinks at the same time due to Coronavirus?

Lower prices for everyone. Mmmmmm. Can you smell the deflation? (this doesn't include all the fired employees and vendors)

Ok. It probably won't be exactly that simple thanks to the bankruptcy process. Some cars will be sold off, most likely, and not all. 

One way hyper-inflationists can get their way is if the United States government decides to convert the $18.8 billion of debt into Government debt.

But wait, the US Government would have to bail out pretty much every business that can no longer pay its debt if we look at this from a macro scale. 

The exact math on that I will cover in a different post.

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