Analysis & Opinions - Project Syndicate
The Heightened Risks of a US Downturn
The US economy has experienced nine recessions during the last 50 years. What makes the current situation unusual and more worrying than in the past is the low level of short-term interest rates and the high (and rising) level of federal debt, which will limit policymakers' ability to provide the stimulus needed to counter a recession.
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Feldstein, Martin.“The Heightened Risks of a US Downturn.” Project Syndicate, January 26, 2018.
The Author
Martin Feldstein
- Member of the Board, Belfer Center for Science and International Affairs
- George F. Baker Professor of Economics at Harvard University
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Why the United States Should Spread Democracy
The US economy has experienced nine recessions during the last 50 years. What makes the current situation unusual and more worrying than in the past is the low level of short-term interest rates and the high (and rising) level of federal debt, which will limit policymakers' ability to provide the stimulus needed to counter a recession.
Want to Read More?
The full text of this publication is available via the original publication source.The Author
Martin Feldstein
- Member of the Board, Belfer Center for Science and International Affairs
- George F. Baker Professor of Economics at Harvard University
- Recommended
- In the Spotlight
- Most Viewed
Recommended
Analysis & Opinions - The Wall Street Journal
Stocks Are Headed for a Fall
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Why the United States Should Spread Democracy
CAMBRIDGE – The United States’ economy is roaring ahead, and above-trend GDP growth looks set to continue in 2018 and 2019. Although the expansion is in its ninth year, there is no sign of an imminent slump.
The greatest risk to the economic expansion is the fragility of the financial sector. A decade of excessively low interest rates has pushed asset prices to extreme heights. The real yield on ten-year Treasury bonds is approximately zero. The price-earnings ratio of the S&P 500 share index is about 70% above its historic average. If these and other asset prices reverted to their historic benchmarks, investors would suffer losses in excess of $10 trillion, leading to declines in consumer spending and business investment.
Economic activity could also slow as a result of international conflict in Korea, heightened trade disputes, or domestic political events in the US.