The Shutdown Isn’t the Only Threat to the Economy

By Sheila Bair (original source The New York Times)

“The momentum behind the American economy is strong. In 2018, unemployment hit its lowest rate in 49 years, 3.7 percent. Real wages were (finally) increasing and inflation remained muted. In 2019, growth is projected to slow but still remain above 2 percent.

Yet risks abound. The trade war and the escalating drama over the government shutdown threaten growth. Meanwhile, the Federal Reserve’s inaugural Financial Stability Report, an early warning system for the financial markets, recently highlighted the vulnerabilities created by investors who show a “high tolerance for risk-taking” in the market for corporate debt. The economy’s continued health will hinge on whether big Wall Street banks can withstand shocks caused by these or other threats and continue lending.”