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
Blackrock asset research director Andrew Ang shares his economic insights into fundamental factors for global asset management.
Apple Boston

2019-07-29 11:33:00 Monday ET

Blackrock asset research director Andrew Ang shares his economic insights into fundamental factors for global asset management.

Blackrock asset research director Andrew Ang shares his economic insights into fundamental factors for global asset management. As Ang indicates in an inter

+See More
The lean CEO encourages iterative continuous improvements and collaborative teams to innovate around core value streams.
Monica McNeil

2020-07-12 08:30:00 Sunday ET

The lean CEO encourages iterative continuous improvements and collaborative teams to innovate around core value streams.

The lean CEO encourages iterative continuous improvements and collaborative teams to innovate around core value streams. Jacob Stoller (2015)  

+See More
Clayton Christensen defines the core dilemma of corporate innovation with sustainable and disruptive advances.
Daisy Harvey

2020-04-17 07:23:00 Friday ET

Clayton Christensen defines the core dilemma of corporate innovation with sustainable and disruptive advances.

Clayton Christensen defines and delves into the core dilemma of corporate innovation with sustainable and disruptive advances. Clayton Christensen (2000)

+See More
Bank of England publishes its latest insights into the economic impact of Brexit on British real productivity, capital investment, and labor supply.
Olivia London

2018-12-03 10:40:00 Monday ET

Bank of England publishes its latest insights into the economic impact of Brexit on British real productivity, capital investment, and labor supply.

Bank of England publishes its latest insights into the economic impact of Brexit on British real productivity, capital investment, and labor supply as of 20

+See More
CNBC news anchor Becky Quick interviews Warren Buffett in light of the recent stock market gyrations and movements.
Becky Berkman

2018-04-05 07:42:00 Thursday ET

CNBC news anchor Becky Quick interviews Warren Buffett in light of the recent stock market gyrations and movements.

CNBC news anchor Becky Quick interviews Berkshire Hathaway's Warren Buffett in light of the recent stock market gyrations and movements. Warren Buffett

+See More
AYA Analytica financial health memo (FHM) blog post and podcast content curation with wise words of wisdom
Daisy Harvey

2019-04-30 07:15:00 Tuesday ET

AYA Analytica financial health memo (FHM) blog post and podcast content curation with wise words of wisdom

Through our AYA fintech network platform, we share numerous insightful posts on personal finance, stock investment, and wealth management. Our AYA finte

+See More