Tag Archives: private debt crisis

Jan 26 2026

Private Credit Crisis on Horizon?


Posted Jan 26, 2026 by Martin Armstrong |  
Defining Private Credit and Its Use Cases

Private credit or direct lending soared in popularity after the 2008 recession when regulators cracked down on banks, but now, companies backed by direct loans are beginning to fail. Fears surrounding private lenders and their legitimacy are coming to a head.

Private credit is lending outside the traditional banking system. It exploded because regulation crushed banks, and when you choke off lending inside the banking system, the market simply moves outside of it. Now the cracks are showing. MSCI reported that write-downs on senior loans inside private credit have tripled since 2022. The $3.4 trillion in loans is expected to grow to $4.9 trillion over the next three years.

The Financial Times reported that investors have pulled billions from the largest private credit funds recently, and a change in perception is precisely how events begin to unfold. Confidence turns, and people realize liquidity is not guaranteed, which can easily turn into panic. Lenders cannot sell if no one wants to buy, and borrowers cannot redeem funds that are tied up.

Private credit has been sold as a safe bet since it does not move daily. There is no ticker symbol flashing red every second. The situation may be fine in an uptrend, but now even BlackRock is coming out to claim “defaults are normal.” But this current market began in a fantasy world where rates would remain artificially low forever.

This private credit mania is also tied to the AI spending surge. Big Tech is issuing record debt to fund the AI buildout. The Guardian even noted how much of this financing is migrating toward private credit and other structures rather than traditional bank balance sheets.

Every bubble has a “new era” narrative. The Roaring 20s had radio and electrification. The late 90s had the internet. The 2000s had housing “never goes down.” Now it’s AI and people borrowing in anticipation of excessive cash flows without thought to what will happen if projections fail.

Private credit has been sold as an escape from traditional banking, but when it implodes, regulators will swoop in and use it to justify expanding government control.

Dec 12 2025

Americans Charged $1 Billion to Buy Now Pay Later Platforms over Black Friday


Posted originally on Dec 12, 2025 by Martin Armstrong |  

Debt Burden

The private debt crisis, coupled with a consumer-based economy, is a recipe for disaster. Americans followed the age-old thinking of “buy now if it will cost more tomorrow” during Black Friday and Cyber Mondy sales, leading to the strongest year of sales on record. The problem is that a large percentage of buyers opted to “pay later” through Buy Now Pay Later (BNPL) payment plans, which are contributing to nationwide household debt levels.

Over $1 billion in sales over Black Friday/Cyber Monday was charged through BNPL platforms, a 4.2% YoY increase, according to shopping data from Adobe, which predicts total BNPL spending will reach $20.2 billion by the end of the holiday season.

BNPL offers interest-free installment payment options and is listed as a payment option during most online checkouts. BNPL loans grew from 16.8 million in 2019 to 180 million in 2021 for a total of $2 billion. By 2022, popularity grew and nearly a quarter of US consumers reported using BNPL for a charge. Those with subprime credit are more likely to use this option. The younger generations who favor mobile purchases are also far more likely to use this option as they may not have a credit card. Worse, BNPL provides an illusion of stronger purchasing power.

About 41% of BNPL users were unable to make payments on time, up from 34%, and 60% of users hold multiple loans. These purchases are generally not for big ticket items. In fact, the average loan is $142 per transaction. Apparel, clothing, shoes, and accessories account for up to 45% of all BNPL orders, followed by electronics at 30%. There has been a rise in consumers using this method for essentials like grocery—a massive red flag for the economy.

Total US household debt hit a record $18.585 trillion in Q3 2025, up from $18.39 trillion in Q2. The average debt per consumer stands at around $105,000 per the New York Fed’s Household Debt and Credit Reporting. Around 70% of that debt ($13.072 trillion) is tied up in mortgages. Yet, American consumers are taking on more debt than necessary or sustainable and holiday spending using “pay later” options are a negative indication of what’s ahead.