Fed warns: wave of bankruptcies could cover economy

US, WASHINGTON (ORDO NEWS) — The US Federal Reserve does not rule out a wave of bankruptcies that will cover the entire economy. Representatives of the Federal Reserve warn that the consequences of economic halt caused by the introduction of quarantine will make themselves felt in the future.

True, in these pessimistic forecasts there is almost always a reservation – if the enterprises remain closed for too long.

Indeed, there are sectors of the economy that continue and continued to work throughout the crisis, but there are also those, especially the services sector, which still cannot resume work.

In different countries, enterprises face different difficulties, however, the threat of bankruptcy hangs over everyone.

According to Bloomberg, the president of the Federal Reserve Bank of St. Louis, James Bullard, said the risk of a large-scale wave of business closure for financial reasons.

Head of the Cleveland Federal Reserve Bank Loretta Mester generally agrees with his colleague, while allowing unemployment to rise to 20%.

Unemployment is the main threat, as it leads to a drop in demand, an increase in crime, defaults on loans and so on.

However, it is worth noting that the Federal Reserve, in turn, did everything in its power to mitigate the effects of the crisis. Unprecedented monetary incentives were undertaken, which allowed to unfreeze the debt market at the first stage and enabled companies to borrow money.


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