Economics
Fed’s Kaplan Warns About Corporate Debt Should Downturn Come
- Says higher debt levels make the U.S. more rate-senstive
- Says high government debt means less investment capacity
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Federal Reserve Bank of Dallas President Robert Kaplan is sounding a warning bell on U.S. corporate debt, arguing it could pose risks to the economy should growth sour.
“U.S. nonfinancial corporate debt as a percentage of GDP is now higher than the prior peak reached at the end of 2008,” Kaplan points out in an essay published Tuesday. In the event of an economic downturn, issues surrounding those loans could “contribute to a deterioration in financial conditions which could, in turn, amplify the severity of a growth slowdown in the U.S. economy.”