These days, news in the United States frequently reports that both individuals and businesses are increasingly filing for bankruptcy.

After the pandemic, the influx of money led to economic recovery, but those on the ground feel very differently now. If you check your household expenses, you can feel it. Money is not circulating. Prices are rising, interest rates are increasing, and there is less and less room to breathe.

The biggest reason is interest rates. The Federal Reserve has raised rates too quickly over the past few years. This was done to control inflation, but the burden has ultimately fallen on consumers and businesses. With rising mortgage rates, credit card interest, and student loan rates, the monthly expenses have noticeably increased. Small businesses are in a more serious situation. It is hard to borrow money, and even if they do, the interest is unmanageable. As a result, more and more are struggling and eventually heading towards bankruptcy.

The situation post-COVID also plays a role. During the pandemic, government support provided a temporary relief, but once that support ended, the reality became clear. With the end of PPP loans and the disappearance of various support programs, self-employed individuals and small businesses suddenly had to bear all the burdens alone. Moreover, sectors like retail and restaurants have not seen sales return to pre-pandemic levels. This is due to changes in consumer behavior.

Additionally, inflation continues to be a hindrance. You can feel it when you go grocery shopping. The amount you can buy with the same money is gradually decreasing. People are only buying essentials and cutting back on dining out or shopping. Consequently, store sales are declining, while businesses face rising labor and raw material costs, making it increasingly difficult to survive.

The financial environment has also tightened. Banks are conducting loan assessments much more strictly. Those with high debt or unstable performance find it difficult to even get through the door. Meanwhile, credit card debt has reached an all-time high. When people start relying on credit cards to cover living expenses, there comes a point where it becomes unmanageable. That point leads to bankruptcy.

International circumstances also contribute. Wars, political conflicts, and supply chain issues have increased import prices, adding to the cost burdens for businesses. Goods are becoming more expensive, sales are becoming harder, and the structure is becoming tangled.

Moreover, debts that were deferred during the pandemic are now coming due all at once. With mortgage repayments resuming, personal bankruptcies are rising, and commercial real estate rents have not recovered, causing real estate-related businesses to also face turmoil.

Experts suggest that this trend is unlikely to change easily in the near future. The current increase in bankruptcy news is painful in the short term, but in the long run, it may serve a cleansing function for the economy, indicating that cautious economic activity is necessary at this time.