Fed Chair Jay Powell suggests that the recent surge in U.S. business debt poses moderate risks to the economy.

Laura Hermes

2019-06-05 10:34:00 Wed ET

Fed Chair Jay Powell suggests that the recent surge in U.S. business debt poses moderate risks to the economy. Many corporate treasuries now carry about 40% debt as part of equity market valuation. St Louis Federal Reserve Bank recent data indicate that the corporate-debt-to-EBITDA ratio has risen to the upper range of 2.3x to 3.1x.

Powell warns that the current level of business debt can cause financial stress to borrowers if the economy weakens. However, Powell adds the cautionary caveat that business debt may not present imminent risks to U.S. financial system stability, household consumption, and business growth. As the Federal Reserve continues to assess the main amplification of business debt deterioration, short-term liquidity risk remains moderate in the core U.S. financial sector. In the meantime, the Trump administration seeks to raise fiscal deficits to support ambitious public programs on infrastructure, education, residential estate, health care, and social security etc. This public debt accumulation may crowd out intertemporal business debt capacity at the margin. If the U.S. aggregate debt capacity remains invariant over time, the government either has to tolerate higher inflation in the form of seigniorage taxes, or needs to reconsider the ripple effects of incremental corporate debt on the real economy.

 


If any of our AYA Analytica financial health memos (FHM), blog posts, ebooks, newsletters, and notifications etc, or any other form of online content curation, involves potential copyright concerns, please feel free to contact us at service@ayafintech.network so that we can remove relevant content in response to any such request within a reasonable time frame.

Blog+More

Thomas Sowell argues that some economic reforms inadvertently exacerbate economic disparities.

Daisy Harvey

2023-11-14 08:24:00 Tuesday ET

Thomas Sowell argues that some economic reforms inadvertently exacerbate economic disparities.

Thomas Sowell argues that some economic reforms inadvertently exacerbate economic disparities. Thomas Sowell (2019)   Discrimination and econo

+See More

Federal Reserve reduces the interest rate by another quarter point to the target range of 1.75%-2% in September 2019.

John Fourier

2019-10-07 12:35:00 Monday ET

Federal Reserve reduces the interest rate by another quarter point to the target range of 1.75%-2% in September 2019.

Federal Reserve reduces the interest rate by another key quarter point to the target range of 1.75%-2% in September 2019. In accordance with the Federal Res

+See More

House of Representatives considers a government expenditure bill with border wall finance and so sets up a shutdown stalemate with Senate.

Laura Hermes

2018-12-23 13:39:00 Sunday ET

House of Representatives considers a government expenditure bill with border wall finance and so sets up a shutdown stalemate with Senate.

The House of Representatives considers a government expenditure bill with border wall finance and therefore sets up a shutdown stalemate with Senate. As fre

+See More

Foreign majority owners offer Sprint and T-Mobile to stop using HuaWei critical technologies after the U.S. telecom merger.

Daphne Basel

2018-12-20 13:40:00 Thursday ET

Foreign majority owners offer Sprint and T-Mobile to stop using HuaWei critical technologies after the U.S. telecom merger.

T-Mobile and Sprint indicate that the U.S. is likely to approve their merger plan as they take the offer from foreign owners to stop using HuaWei telecom te

+See More

AYA fintech finbuzz analytic report on the global macro economic outlook Winter-Spring 2020

Andy Yeh Alpha

2020-02-02 11:32:00 Sunday ET

AYA fintech finbuzz analytic report on the global macro economic outlook Winter-Spring 2020

Our fintech finbuzz analytic report shines fresh light on the current global economic outlook. As of Winter-Spring 2020, the analytical report delves into t

+See More

CNBC reports the Top 5 features of Apple's iPhone X.

Peter Prince

2017-09-13 10:35:00 Wednesday ET

CNBC reports the Top 5 features of Apple's iPhone X.

CNBC reports the Top 5 features of Apple's iPhone X. This new product release can be the rising tide that lifts all boats in Apple's upstream value

+See More