In a new research paper warn two Federal Reserve economists about the health of the US economy. According to them, the number of non-financial companies that are currently in financial trouble is at an all-time high. “The percentage of non-financial firms in trouble is at its highest level since the 1970s,” the economists said.
The percentage in question is currently at 37 percent.
Impact is yet to come
Based on their calculations, the Federal Reserve economists conclude that the real impact of the central bank’s aggressive interest rate campaign has yet to be felt.
“With 37 percent of companies currently experiencing financial stress, our estimates suggest that the recent rate hikes are likely to have a stronger effect on the investment climate, unemployment and overall activity than previous interest rate campaigns,” the economists write.
“The effects in our analysis peak about one or two years after the shock, suggesting they will be most felt in 2023 and 2024,” they continue.
That would be reasonably in line with most economists’ expectations, which still predict a recession for the coming months. So should we really be concerned?
wave of layoffs
Furthermore, the Federal Reserve warns that its own policies could push the 37 percent of stressed companies closer to bankruptcy. The failure of those companies can then generate a wave of unemployment.
“Our analysis may underestimate the actual effects on the labor market, as interest rate hikes could potentially push stressed companies toward bankruptcy, contributing to a wave of layoffs,” the Federal Reserve said.
The resulting redundancies have not been included in the economists’ estimates, so we have to consider their initial estimates as conservative.
It remains to be seen whether it is a good thing for Bitcoin if a massive recession manifests itself. After all, you usually see people selling their risk assets for assets with which they can pay the bills and groceries.
