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If I had to bet, it'd be a corporate debt bubble propped up by the Federal Reserve low interest rates and practice of quantitative easing. As the coronavirus cr
by bhl 7y ago
If I had to bet, it'd be a corporate debt bubble propped up by the Federal Reserve low interest rates and practice of quantitative easing. As the coronavirus creates a supply shock, businesses aren't going to be able to produce enough goods to sell and as a result, they will default on their debts. Similar to the 2008 burst, this is going to cause a ripple effect in the financial industry where banks are going to try to deleverage, inadvertently causing a credit crisis that slows down the global economy because no bank will want to lend out to something that's not a sure bet. How did the Federal Reserve start this? Because by having credit easy to attain, companies were willing to issue riskier bonds with higher yields.